Universal Social Protection Country Cases

Universal Social Protection

Country Cases

Global Partnership for Universal Social Protection USP2030 Universal Social Protection Country Cases

Global Partnership for Universal Social Protection USP2030

World Bank

International Labour Office

The designations employed in this publication, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the International Labour Office or the World Bank concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies andother contributions rests solely with their authors, and publication does not constitute an endorsement by the International Labour Office or the World Bank. The International Labour Officeorthe World Bank do not guarantee the accuracy of data included in this publication and accept no responsibility whatsoever for any consequence of their use. Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office or the World Bank, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. Table of Contents

Introduction 1

Argentina Universal social protection for children and adolescents 5 Argentina Universal maternity protection 11 Azerbaijan Universal Pensions 17 Bolivia Universal Pensions 27 Botswana Universal old-age pensions 33 Brazil Universal old-age pensions 39 Cabo Verde Universal Pensions 47 China Universal Pensions 53 Georgia Universal old-age pensions 59 Kosovo Universal old-age pensions 64 Lesotho Universal pensions 70 Maldives Universal old-age pensions 76 Mongolia The Universal Child Money Programme 81 Mongolia Universal old-age pensions 89

iii Namibia The Basic Social Grant for all older persons 95 Nepal Universal old-age and disability pensions, and other universal allowances 103 South Africa Universal disability grants 110 South Africa Universal pensions 115 Thailand Universal Pensions 121 Timor-Leste Universal old-age and disability pensions 126 Trinidad and Tobago Universal Pensions 134 Ukraine Universal old-age, disability and survivors pensions 146 Zanzibar The universal Pension Scheme 156 Developmental impacts of expanding social protection 163 Sub-Saharan Africa: Economic and productive impacts of national cash transfers programmes 173 Financing universal social protection 182

A shared mission for universal social protection - Concept Note 189

iv Universal Social Protection Partnership (USP2030)

Introduction

Transforming our World: The 2030 Agenda for Sustainable Development, was adopted by Heads of State and Governments in September 2015 as a plan of action for people, planet and prosperity that calls for eradicating poverty. All countries and all stakeholders, acting in collaborative partnership, are called to implement this plan.

Sustainable Development Goal 1 (SDG1) calls for ending poverty in all its forms and dimensions, including eradicating extreme poverty by 2030. It aims to ensure that all people enjoy a basic standard of living, including through social protection systems. Countries are called to ensure social protection systems for all, including floors for the poor and vulnerable, increase access to basic services, and support people harmed by climate-related extreme events and other economic, social, and environmental shocks and disasters. Target 1.3 (Goal 1) seeks to implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable.

The Global Partnership for Universal Social Protection (USP2030) was established to support this objective. The USP 2030 was launched in September 2016 at the time of the UN General Assembly, by the International Labor Organization (ILO) and the World Bank Group (WBG) in partnership with the African Union, the Food and Agriculture Organization (FAO), the European Commission, the Inter-American Development Bank (IDB), Organization of Economic Cooperation and Development (OECD), the United National Development Programme (UNDP) and its International Poverty Centre for Inclusive Growth (IPC-IG), the United Nations Children’s Fund (UNICEF) and others, along with Belgian, Finnish, French and German development cooperation, and international civil society organizations such as HelpAge, the International Council of Social Welfare (ICSW), Save the Children, among others.

1 Introduction

The objective of USP2030 is to increase the number of countries that can provide universal social protection, supporting countries to design and implement universal and sustainable social protection systems, joining efforts of the international agencies, donors, and governments in providing social protection coverage for all people. Universal coverage and access to social protection are central to ending poverty and boosting shared prosperity, the World Bank’s twin goals by 2030. Universal social protection coverage is at the core of the ILO’s mandate, guided by ILO social security standards including the Social Protection Floors Recommendation No. 202, adopted by 185 Member states in 2012. Many countries have embarked in expanding social protection coverage and are reporting significant progress. However, the poorest countries continue to have enormous coverage gaps. The ILO’s “World Social Protection Report 2017-19 on Universal Social Protection to Achieve the Sustainable Development Goals” indicates that despite significant progress in the extension of social protection in many parts of the world, only 45 percent of the global population are effectively covered by at least one social protection benefit, while the remaining 55 percent – as many as 4 billion people – are left unprotected.

Universal social protection refers to the integrated set of policies and programs designed to provide income security and support to all people across the life cycle, with particular attention to the poor and the vulnerable. Universal social protection includes adequate cash transfers for all who need it, especially: children; benefits/support for people of working age in case of maternity, disability, work injury or for those without jobs; and pensions for all older persons. This protection can be provided through social insurance, tax- funded social assistance/safety nets benefits, public works programmes and other schemes guaranteeing basic income security. Social protection programs aim at specific demographic groups of the population (e.g., children, persons with disabilities, women and men of the working age, older persons, etc.) and at households in chronic or transient (for instance, caused by shock such as a natural disaster) poverty. The objective of the social protection programmes is often not only to provide income support, but also to build up resilience to shocks and enhance connections to productive activities.

Social Protection systems when well-designed and implemented are a critical part of the foundation for sustained social and economic development – for individuals, households, communities, and societies. This development role of social protection manifests itself in many ways, such as: (i) it prevents

2 Introduction and reduces poverty, promotes social inclusion and dignity of vulnerable populations; (ii) it contributes to economic growth through increases in consumption, savings and investment at the household level and macro level; (iii) it promotes human development and formalization; (iv) it increases productivity and employability by enhancing human capital and productive assets; (v) it protects individuals and families against the losses due to shocks, whether they be pandemics, natural disasters, or economic downturns; (vi) it builds political stability and social peace, reducing inequalities, social tensions and violent conflict; enhancing social cohesion and participation; (vii) it is a human right that everyone, as a member of society, should enjoy, including children, mothers, persons with disabilities, workers, older persons, migrants, indigenous peoples and minorities.

Countries have many options/pathways to achieve universal social protection coverage. USP2030 partners will work with countries to help advance the universal social protection agenda, recognizing: (i) national ownership of development processes towards universal social protection; (ii) the choice of countries to aim for gradual and progressive realization or immediate universal coverage; (iii) the heterogeneity in the design and implementation of universal social protection schemes. In other words, building the road to USP should recognize that every country case is unique as countries have a wide set of options to achieve universal social protection coverage. Generally, universality is achieved by combining contributory and non-contributory schemes. As the compilation of the country case studies in this volume demonstrates, some countries have opted for an explicit universal coverage of specific population groups (e.g., universal old age social pensions in Botswana, East Timor, Georgia, Namibia and Zanzibar/Tanzania) while others have employed a combination of public social insurance and social assistance to building up coverage (e.g., Brazil, Cabo Verde, China, Thailand, Trinidad and Tobago). Some countries have the principles of universalism (universal rights) embedded in their national constitutions (e.g. Bolivia, South Africa), whereas others have pursued those principles without constitutional provisions. Universal social protection is most commonly started with universal old-age pensions (as most country case studies in this volume indicate), but some countries have opted to make universal, separately or in parallel, benefits for children (e.g., Universal Child Money Program in Mongolia and Universal Child Allowance in Argentina), people with disabilities (e.g., Universal Disability Grants in South Africa), and mothers (e.g., Universal Maternity Protection in Argentina).

3 Introduction

Countries have used many options to finance universal social protection. Those options include: (i) re-allocating public expenditures (e.g., from financing public subsidies to financing specific programs); (ii) increasing tax revenues, including revenue generated from taxation of natural resources; (iii) using the reductions of debt or debt servicing; (iv) expanding social security coverage and contributory revenues, among other financing options. Regardless of financing mechanisms and sources, universal social protection systems should be equitable and sustainable.

This publication presents country examples that document different pathways to achieve universal social protection coverage. These country cases encompass a wide range of programs, country settings and regions, including Sub-Saharan Africa (Botswana, Cabo Verde, Lesotho, Namibia, South Africa and Zanzibar), Europe and Central Asia (Azerbaijan, Georgia, Kosovo and Ukraine), Latin America and Caribbean (Argentina, Bolivia, Brazil and Trinidad and Tobago), East Asia and Pacific (China, Mongolia, Thailand and Timor-Leste), and South Asia Region (Maldives, Nepal). As all these case studies indicate, there is no “one size fits all” in achieving universal social protection objectives. Every country has its own vision and path for achieving it, depending on the country priorities, financing and implementation capacity.

This is a first of such publications under the Global Partnership for USP2030. One of the objectives of the partnership is to continue documenting cases of universal social protection to show that universal social protection is feasible in developing countries and to share knowledge that supports the achievement of the USP2030 initiative.

4 Argentina Main lessons learned • The integration of the contributory Universal social protection and non-contributory components for children and adolescents is a strategy to guarantee the consolidation of “comprehensive social security systems” and to In 2009, the Universal Child Allowance ensure the universal protection (UCA) was introduced in response to of children and adolescents, in the effects of the global crisis, and accordance with the provisions with the aim of consolidating sev- of ILO Social Protection Floors eral non-contributory transfer pro- Recommendation, 2012 (No. 202) grammes for families with children. and the Convention on the Rights This non-contributory cash transfer of the Child. programme expanded coverage to children under age 18 (and disabled • The introduction of the UCA has children without any age limit), as enabled the development of a well as to unemployed workers, infor- system to support the income of mal workers, domestic workers and families with children, according monotributistas (Monotributistas are to the employment status of mainly low-income, self-employed the adults responsible for the workers participating in the Simplified children and adolescents and the Regime for Small-scale Contributors, income earned. The system has known as the Monotributo. This is a three components: contributory simplified, integrated tax system that component, non-contributory rolls income, value-added and social component and tax deductions security taxes into a single monthly for higher-income workers. payment). The provision of income insurance for • Studies have shown that the families with children and adolescents policy to extend social protection is made up of three components: through the UCA has had a major contributory family allowances (CFA), impact on reducing extreme non-contributory family allowances poverty and inequality and on and tax deductions from income increasing school attendance of (tax on earnings) for higher-income adolescents aged 16 and 17. workers with children.

5 Argentina: Universal social protection for children and adolescents

Coverage data Figure 1: Overview of social protection coverage for children by programme Together, these three components reach approximately 83 per cent of children and adolescents in Argentina. In absolute terms, some 10.3 million children and adolescents are covered by an income transfer mechanism.

1. Background

Since the late 1990s, several initiatives have been introduced to provide income security for households with children. During the 2000s, social assistance programmes used the per cent). presence of children in the household In legal terms, the UCA was created as a reference, and programmes for the through a Decree of the National social protection of children were even Executive Branch (1.602/09), which implemented at the sub-national level. modified the Law of Family Allowances The UCA was introduced in Argentina (N° 24.714). as a result of years of intense discussion This decree established the incorpo- on proposals designed to universalize ration of a non-contributory sub-sys- protection of children and adolescents. tem within the General Family Allow- One of the most noteworthy proposals ance Regime. In other words, both was the extension of family allowances. types of benefits are now regulated The almost universal coverage achieved by this Law. is due to several factors, most notably the implementation of the UCA, the 2. Structure and main increase in formal employment that characteristics of protection of expanded contributory coverage children and adolescents levels and the incorporation of monotributistas in the CFA component As mentioned, the provision of income (April 2016). security for children and adolescents Also of note is the extension of non- in Argentina has three components: contributory pensions to mothers of seven or more children, which provides • Contributory family allowances income security to large families (CFA), composed of the “Family (between 2003 and 2014, the number Child Allowance,” which covers the of main beneficiaries increased by 471 dependents of formal middle- and

6 Argentina: Universal social protection for children and adolescents

low-income employees, beneficiaries and UCA beneficiaries receive the of certain social security guarantees same amount ($ 966). In 2015, the (unemployment and work injury) automatic mobility of benefits (twice and, since April 2016, dependents of annually) based on the pension workers of the Monotributo regime. mobility index was established by law. The National Social Security Admin- • Non-contributory family allow- istration (ANSES) is responsible for ances, composed of the Universal managing both contributory and Child Allowance (UCA), which is a non-contributory family allowances. semi-conditional cash transfer for In other words, the ANSES receives each child and disabled child of un- applications, processes and evaluates employed workers, those of the in- them and pays both benefits). formal economy, social monotributi- The integration of the contributory stas and domestic workers. and non-contributory components The cash transfer is semi-condition- (CFA and UCA) pave the way for the al: the 80 per cent is granted through consolidation of a “comprehensive the usual system of social security social security system” as established payments while the remaining 20 per in the ILO Social Protection Floors cent is paid once the main beneficiary Recommendation, 2012 (No. 202). confirms health checkups, immuniza- Nearly six years after the UCA was tion records and certification of com- implemented, evidence indicates that pletion of the school year of children these social protection programmes of and adolescents, whichever is the high coverage do not have a negative case. impact on labor market variables. This The UCA is a component of the positive result is largely due to the non-contributory pillar, together with coordination among programmes that family allowances for dependents of guarantee income and to active labour beneficiaries of old-age pensions and market policies. of beneficiaries of certain non-con- Several factors explain the fact that 17 tributory pensions (disability and for- per cent of children and adolescents mer soldiers in the Falklands War). are not covered under any scheme. This group mainly includes children • Deduction or tax credit for each and adolescents whose parents: i) child, for higher-income workers are employees with higher earnings who pay income tax. The tax credit – or slightly lower earnings – than the is the component available to higher- established ceilings; ii) they are higher- income workers who pay individual income monotributistas; iii) they are income tax. independent workers; or iv) they are immigrants residing in the country for Low-income beneficiaries of the FCA less than three years. The situation of

7 Argentina: Universal social protection for children and adolescents children and adolescents not under poverty and inequality. Studies family care should also be mentioned (Bertranou, 2010; Maurizio and given that they are not included in any Vázquez, 2014) have shown that UCA of the current protection components. reduced poverty rates, especially Moreover, there are children and extreme poverty. There is also adolescents who are eligible for one empirical evidence that suggests that of the established schemes but who the UCA contributes to improved do not receive benefits for a variety income distribution, as measured both of reasons, especially: problems by the Gini coefficient and in terms associated with family relations; of income gaps (Hintze and Costa, problems associated with their or their 2014 and Curcio and Beccaria, 2013). parents’ identification documents; Additionally, some studies found and non-compliance with some that the UCA had a positive impact requirements for access. on school attendance of adolescents aged 16 and 17 (the group with the 3. Financing highest dropout rates) as well as on reducing child labour (Jiménez and The contributory component Jiménez, 2015). Nevertheless, given is financed through employers’ the lack of available standardized contributions to social security while data, more evidence is needed on the social security resources cover the impact of this programme on school cost of the UCA. attendance, particularly with respect As a result of the expanded coverage, to secondary school. the resources allocated to cash The implementation of this policy transfers for children and adolescents also led to a 50 per cent increase in have been sharply increased. In the number of children enrolled in 2014, the amount allocated to the the SUMAR Plan – guaranteed health protection of this segment of the benefits – and a 14 per cent increase population was 1.04 per cent of GDP, in the number of pregnant women where the principal components were enrolled (MSAL, 2012). the UCA (0.50%), the CFA (0.46%) and the family allowances for people 5. What are the challenges? receiving an old age pension (0.08%). The main challenges for policies to 4. What is the impact of guarantee income security for children the UCA? and adolescents can be summarized as follows: Policies to extend social protection, in this case the UCA, had considerable • Despite efforts to increase UCA impact in terms of reducing extreme coverage, the challenge remains

8 Argentina: Universal social protection for children and adolescents

to incorporate a large number of Bertranou, F. (coord.) 2010. Aportes para un eligible children and adolescents piso de protección social en Argentina: el caso who for different reasons face de las asignaciones familiares. Buenos Aires, barriers to accessing the benefits. ILO Country Office for Argentina.

• The role of established conditions Bertranou, F., Casalí, P. and Schwarzer, H., 2014. needs to be redefined to emphasize La estrategia de desarrollo de los sistemas de the concept of the “universal right” seguridad social de la OIT. El papel de los pisos of children and adolescents to de protección social en América Latina y el health and education. Caribe. ILO Regional Office for Latin America and the Caribbean, Lima. • The sufficiency of UCA benefits should be assessed in an effort to Bertranou, F., Cetrángolo, O., Casanova, L., enable children and adolescents to Beccaria, A and Folgar, J. 2015. Desempeño get out of poverty. y Financiamiento de la Protección Social en Argentina. Buenos Aires, ILO Country Office for Argentina. • A micro-assessment of the UCA should be conducted to identify Casalí, P. and Schwarzer, H., 2010. Social bottlenecks and propose reforms Protection Floor: Conceptual Development that help facilitate programme and Application in Latin America. 2010 Labour implementation and compliance Overview. ILO Regional Office for Latin America with established conditions. and the Caribbean, Lima.

Curcio, J. and Beccaria, A. 2013. Políticas de This Universal Social Protection brief protección social y su impacto en la situación was produced by Alejandra Beccaria, de la niñez y de sus familias. El caso de la Luis Casanova and Pablo Casalí of the Asignación Universal por Hijo para Protección ILO, with contributions from Sebastián Social a tres años de su implementación, XI Waisgrais and Javier Curcio of UNICEF. It National Political Science Congress, Paraná. was reviewed by Isabel Ortiz of the ILO. Hintze, S. and Costa, M. 2014. “Capacidad protectoria de la Asignación Universal por Hijo para Protección Social: problemas y debates a References cuatro años de su implementación,” in Danani, C. and Hintze, S. (Coords.) Protecciones y Arcidiácono, P., Carmona Barrenechea, V. and desprotecciones II: Problemas y debates de la Straschnoy, M. 2011 “La asignación universal seguridad social en la Argentina. Buenos Aires, por hijo para protección social: rupturas y Universidad Nacional de General Sarmiento. continuidades ¿Hacia un esquema universal?,” in Revista Margen, Number 61, June 2011.

9 Argentina: Universal social protection for children and adolescents

Jiménez, M. and Jiménez. 2015. Asistencia escolar y participación laboral de los adolescentes en Argentina: el impacto de la Asignación Universal por Hijo. Working Paper Series N° 11, Buenos Aires, ILO Country Office for Argentina.

10 Main lessons learned Argentina • In line with ILO’s Recommenda- tion No. 202, maternity protec- Universal maternity tion in Argentina encompasses protection both transfers in cash and in kind. It includes income security measures through a number of social Argentina’s Constitution provides for transfer programmes, universal the protection of pregnant and lactat- access to basic social services and provisions for maternity leave. ing female workers. Social protection in Universal maternity protection in the case of maternity includes mater- Argentina had impressive results, nity protection in the workplace, con- child and maternal mortality have tributory and non-contributory family been reduced by 34 per cent and allowances and pensions for mothers 24 per cent respectively. with 7 or more children. In addition, several programmes provide universal • The contributory and non- access to basic social services such as contributory programmes are the programme SUMAR which offers administered by the National basic health services including ante- Social Security Administration natal and postnatal consultations and (ANSES); complementary health delivery. The national legal framework programmes are operated or regulated by the National Health also provides paid and unpaid mater- Ministry; good coordination nity leave and paid paternity leave for among institutions is required registered workers. to guarantee a comprehensive maternity protection. 1. Towards universal maternity protection • The establishment of an adapted legal framework Maternity protection in Argentina -en ensures the sustainability of compasses both transfers in cash and social protection programmes. in kind. It includes income security measures through a number of social transfer programmes, universal ac- 2. How is the system organized? cess to basic social services and provisions for maternity leave. Argentina’s Contributory programmes include maternity protection policy is in line maternity protection in the work with the Social Protection Floors Rec- place and family allowances. ommendation, 2012 (No.202). To extend maternity protection to uncovered groups, two non-

11 Argentina: Universal maternity protection contributory allowances were established in 2009 and 2011 respectively: the universal child allowance (Asignación Universal por Hijo) and the pregnancy allowance (Asignación por Embarazo). The contributory and non- contributory programmes are administered by the National Social Security Administration (ANSES). Out of a total number of 13 million the two programmes and income children and teenagers below the tax deductions brings the coverage age of 18 years, the Universal Child to 74.3 per cent of all children below Allowance and Pregnancy Allowance the age of 18 years. At the same cover 7 million, i.e. a coverage rate time, the National Commission for of 53.8 per cent. In addition, income Social Pensions of the Ministry of tax reductions are applied to families Social Development administers the with children. The combination of pensions for mothers with 7 or more children.

Table 1. Social transfers programmes

Programme Provisions Beneficiaries Beneficiaries Contributory programmes

Maternity Monthly income replacement equivalent to Employees covered by the protection in the 100% of the workers’ salary Law on work related risks and work place unemployment protection

• Prenatal: between AR$ 199 and 2,084 (US$ 13 and 141) per month Same as above, plus beneficiar- • Per birth: AR$ 1,125 (US$ 76) ies of the pension system and • Per adoption: AR$6748 (US$ 456) non-contributory pension, up Family allowances • Per child: between AR$ 199 and 2,084 (US$ to a maximum monthly family 13 and 141) per month income set in the Law (of AR$ • School allowance: between AR$ 808 and 60,000 = US$ 4,054) 1615 (US$ 55 and 109) per year Non-contributory programmes

Universal Child AR$ 966 (US$ 65) per month per child, with Beneficiaries of the Monotax, Allowance conditionalities on health and education unemployed persons, workers AR$ 966 (US$ 65) per month starting from in the informal economy with Pregnancy week 12 of pregnancy and until the child birth income levels below the mini- Allowance or the interruption of pregnancy mum wage, domestic workers

Pensions for moth- Lifetime monthly amount equivalent to the Mothers with 7 or more chil- ers with 7 or more minimum old age pension of AR$ 4958.90 dren (own or adopted children) children (US$ 335) (ANSES, March 2016)

Source: Decree 1141/2015-Family allowances from March 2016 onwards

12 Argentina: Universal maternity protection

As far as universal access to basic age that are without any contributory social services is concerned, female social health protection. In 2015 the workers in the formal economy can Programme SUMAR was covering access social health services of trade 13 million people. According to the unions. They can also access prepaid national census, the population health care services in private clinics without any social health protection and sanatoriums. The programme was 14 million in 2010. Therefore the SUMAR plays an important role as Programme SUMAR has contributed it provides access to basic health to significantly close the social health care to vulnerable families with protection gap in Argentina. the objective to reduce child and The programme is operated by the maternal mortality, strengthen National Health Ministry and is access to health care for school age financed from the public budget. children and teenagers, and improve It is linked with the Universal Child the overall care provided to women Allowance and the Pregnancy through regular health check-ups. Allowance. The Programme SUMAR was In addition the national legal created in 2012 in the context of framework includes paid and unpaid the extension of coverage of the maternity leave for female workers Plan Nacer (2005). The Programme in registered or formal employment. SUMAR contributed to facilitate Although there are some differences access to health care for pregnant between the maternity leave in the women and children up to 6 years of public and private sectors, in both age. It was then extended to children cases the benefits are of 100 per cent and teenagers of between 6 and 19 of the salary during the total period years of age, and consequently to of the maternity leave. The benefits men and women of 20 to 64 years of are financed from the social security.

Table 2. Health services Sub-system Institutions Coverage

Public provincial and district hospitals Provides health services to all the as well as primary health centres population Public system Programme SUMAR Essential public health functions pro- Provides health services to the vulner- gramme (FESP) able population Programmes Remediar and Redes Covers health risks for salaried workers System of social National social services system services and their families

Enterprises providing prepaid health Provides coverage to those that pay a Private subsystem packages in sanatoriums and private clinics premium

Source: ILO, Social Protection Platform (www.social-protection.org)

13 Argentina: Universal maternity protection

At the end of their maternity leave SUMAR, 230,000 children have mothers can take an unpaid leave entered the Universal Child called “excedencia” to take care Allowance and in 2014 47,000 of their child during the first year women have automatically received of life (not clear if the excedencia the Pregnancy Allowance. lasts one year or if it ends when the Existing Universal Child Allowance child reaches one year of age). The and Pregnancy Allowance combined unpaid maternity leave only applies with income tax deductions for to female workers in registered paid families with children benefit 74.3 employment. per cent of all children below the age Men are entitled to a paternity of 18 years. The Programme SUMAR leave of between two and five days had also a significant impact by and cannot benefit from the unpaid facilitating access to health care to 13 leave. million people. These interventions have contributed to improve the 3. What are the main impacts quality of life of the most vulnerable on people’s lives? families in Argentina and their implementation is one of the most Over the last ten years, maternity significant progresses made in the protection coverage was increased fight against poverty. and reinforced by linkages and Due to the linkages that exist between synergies between the various the programmes, the Universal Child programmes. Thanks to major Allowance and Pregnancy Allowance affiliation efforts of the Programme have in 2014 contributed to increase

Table 3. Maternity leave in the registered or formal sector

Selected measures Legal protection Maternity leave Lactating periods

Dismissals are prohibited 2 periods of 30 during the pregnancy, minutes each until Private sector the maternity leave and 90 days the child reaches 7.5 months before and 12 months after the delivery date 2 periods of 1 Same rights as hour each until permanent staff 100 days for the 1st the child reaches members (Law on Labour and 2nd child; 110 12 months Public sector Contract does not apply days for the 3rd Option to reach or during the maternity child and beyond leave the office 2 period) hours in earlier or later Source: Law No20.744 on the work contract and Law No. 25.164 on the regulation of the national public employment

14 Argentina: Universal maternity protection the enrolment of children and (No. 156) that was ratified by pregnant women in the Programme Argentina in 1988. SUMAR by 50 per cent and 14 per cent respectively. Thanks to the extension • Promote fathers’ co-responsibility in of maternity protection in the past child care by extending paternity decade, child and maternal mortality leave to uncovered groups and have been reduced by 34 per cent increasing the duration of the and 24 per cent respectively. The paternity leave. Programme SUMAR was rewarded by the Geneva Health Forum and • Improve Labour Law compliance highlighted as a model and source through prevention and inspection of inspiration for other countries measures. (Ministry of Health, 2015). • Extend the maternity leave to 4. What are the main female workers in the informal challenges? economy.

One of the main challenges relies This Universal Social Protection brief in the inclusion of the right to care was produced by Analía Calero. It was as one of the components of the reviewed by Victoria Giroud, Fabio social protection system (ILO, 2014). Durán-Valverde, Valerie Schmitt and To ensure that the right to care can Isabel Ortiz of the ILO. become a reality, recommendations include:

• Ratify ILO’s Maternity Protection References Convention, 2000 (No. 183) in order to extend the duration of ANSES.2015. Administración Nacional de la maternity leave from 12 to 14 Seguridad Social. www.anses.gob.ar weeks. ILO. 2012. Recommendation concerning • Create the necessary legal framework National Floors of Social Protection, 2012 to ensure that in enterprises with (No. 202) www.ilo.org/dyn/normlex/es/f? certain numbers of female workers, p=NORMLEXPUB:12100:0::NO::P12100_ maternity rooms and child-care INSTRUMENT_ID:3065524 centres are established, in line with ILO’s Workers with Family ILO. 2009. Protección de la maternidad. Notas Responsibilities Convention, 1981 OIT sobre Trabajo y Familia N°4. www.ilo. org/americas/publicaciones/notas-trabajo-y- familia/lang--es/index.htm

15 Argentina: Universal maternity protection

ILO. 2010. Maternity at work: A review of national legislation. Second edition. Geneva. www.ilo.org/global/publications/ilo-bookstore/ order-online/books/WCMS_142159/lang--es/ index.htm

ILO. 2012. “Avances en la consolidación de la protección social en Argentina.” Notas OIT. Trabajo decente en Argentina. Buenos Aires. www.ilo.org/buenosaires/publicaciones/notas- trabajo-decente/WCMS_221702/lang--es/ index.htm

ILO. 2014. Recibir y brindar cuidados en condiciones de equidad: desafíos de la protección social y las políticas de empleo en Argentina. Documento de trabajo Nº 5. www.ilo.org/buenosaires/publicaciones/ WCMS_302535/lang--es/index.htm Ministerio de Salud. 2013. Plan para la reducción de la mortalidad materno-infantil de las mujeres y las adolescentes. www.msal.gov. ar/plan-reduccion-mortalidad

Ministerio de Salud de la Nación. 2014. Memoria Anual, Programa SUMAR, 2013. www.msal.gov.ar/sumar/images/stories/pdf/ memoria-anual-sumar-2013.pdf

Ministerio de Salud de la Nación, 2015. Programa SUMAR. www.msal.gov.ar/sumar

16 Main lessons learned

Azerbaijan • Azerbaijan illustrates how a Universal Pensions former soviet republic can progress towards universal pension coverage, integrating important coverage constrains. Strong political commitment Universal coverage for old-age, is key to develop an efficient disability and survivors: one system and to further reform it. step further to achieving social protection for all • Azerbaijan has demonstrated its willingness for reinvesting Social protection has been one of the economic growth in social leading priorities of the Azerbaijan protection and generating higher Republic for the past years. The benefits rates, progressively pension system is representative of bringing them towards minimum the country’s ability to develop and subsistence revenues. implement universal coverage taking into account a large number of self- • The system was built to be highly employed worker (almost 1 million), adaptable to the ever-changing and an important informal economy. socio-economic structure of Historically, Azerbaijan has inherited the country, and to cope with a universal soviet pension system possible economic shocks. which was underfinanced during first However, only partial indexation years of independence. The situation of pensions after the currency was characterised by political and devaluation and high inflation economic turmoil of the early in 2015 did not allow to cover 1990s, as well as and large number the consequences of economic of Internally Displaced Persons as a crises for the beneficiaries of consequence of armed conflicts. pension schemes in Azerbaijan. In 2001 the government has started In this regards, more efforts are a major pension reform for three necessary in order to ensure main social risks: old-age, disability benefit adequacy. and survivors. The country rapid economic achievements were partially • A multi-tier system guarantees reinvested in social protection, which a variety of resources and helped considerably reducing poverty important dexterity of the system. and vulnerability. Indeed, social However, the introduction of protection floors helped mitigating third pillar in the situation of

17 Azerbaijan: Universal Pensions

economic turmoil on national and on regional financial markets can represent some difficulties.

• The wide coverage of the personal accounting system, based on a unique insurance- pension system, was facilitated by the introduction of a card system for payments.

This universality is reached by the impact of economic crises, due combination of labour pensions to the country’s heavy reliance on oil. (social security part) for those cleared However, recent downturn in oil prices minimum qualifying period, and social and rapid devaluation of national allowances for those who are not currency in 2015 had an important qualified to receive labour pension impact on the real pensions’ level. for three aforementioned risks (social assistance part). 1. What does the system Although since 2006 the labour look like? pension system is based on a 3-pillars structure (basic pension + insurance Azerbaijan’s social protection part + voluntary savings), the third system is under the responsibility pillar was not really implemented. of the Ministry of Labour and A personal accounting system has Social Protection of the Population been established in the mandatory (MLSPP). Since March 2016, the state social insurance area, which State Social Protection Fund (SSPF) enabled the provision of pensions was integrated in the structure of and the transition to insurance the MLSPP. Before, the SSPF had an principles. This was followed by the independent structure and carried implementation of a card system in out important pension reforms in the order to facilitate payments. social security branches. The universal coverage in Azerbaijan Coverage is achieved for three major social risks: At present there are 1.3 million • Old-age beneficiaries of different labour • Disability pension schemes in the country • Survivors (including old age, disability and survivor). It is necessary to add to this

18 Azerbaijan: Universal Pensions figure 0.2 million persons covered by to a labour pension. Since 1 January social allowances for the same risks 2010, the retirement age is 63 for men paid through MLSPP1: and 60 for women, with possibilities of early retirement. Those not eligible Table 1. Overview of the number of labour for a labour pension are entitled to pensions and social allowances beneficiaries social pensions at the age of 67 for men and 62 for women. Labour Social The labour pension is calculated as pensions Allowances the sum of three components: 1) Old-age 781 238 13 833 a basic flat-rate benefit (110 AZN Disability 374 466 139 041 since February 2016) fixed directly by order the government, 2) insured Survivors 144 242 41 286 part revised each year, based on the Total 1 299 946 194 160 consumer price index and fixed by the

Sources: State Statistical Committee of Azerbaijan. formula SH=PSK/T where, SH-amount Data on 01/01/2016 of insured part, PSK- pension capital recorded in the insurance part of Officially, the coverage is universal the personal account of the insured because the entitlement is automatic from 1 January 2006 on the date of (either on labour pension or on social granting old-age labour pension plus allowance). However, some problems pension capital for the mandatory with coverage were observed in the social contribution years of insured past, especially related with official person for the period of prior 2006, recognition of disability and thus T- number of months (144 months entitlement of disability benefits. according to legislation) of the In 2015, 3.09 million personal accounts expected pension payment period were registered for social insurance and 3) voluntary funded element. part. However, an important layer The basic flat-rate pension as well as of economically active population is minimum pension are fixed in relation registered as self-employed people, minimum wage in Azerbaijan which representing around 22 % of the is 105 AZN since February 2016. The employed population. amount of these minimum standards have progressed during last years Benefit packages in order to reach progressively the subsistence minimum for the persons At least 12 years of covered who are incapable of work, which is employment is required to be entitled 115 AZN in 2016. This subsistence minimum for different categories ¹ The MLSPP is paying other social allowances, but of population is reconsidered every they are not making part of this note because they don’t illustrate the universal approach. year based on basket of selected

19 Azerbaijan: Universal Pensions commodities and services. (105 AZN in 2016). Different rates The average labour pension amount apply depending on the sectors and per month is 177.6 AZN in the regions. beginning of 2016 (whereas average old-age pension of 197.6 AZN). The Land owners must contribute with social allowances are fixed as follows: rates depending of the land category. 66 AZN for old-age and disability, 61 The rate per capita and per hectare, is AZN for survivors). 2% to 12% of the minimum wage. The pension adequacy represent an issue because the average Other categories: Civil servants, replacement rate represents between military, prosecutors, etc. have a 38% and 45 % compared to official special compulsory contribution. salary. At the same time, the studies show the positive impact of universal Figure 1. Sources of financing of the pensions on the absolute poverty insurance part of the pension system rate. Oher Sources Financing 0,4%

In 2014, 1,743,743.240 million AZN State Budget of social contributions were collected 39,4% Social by SSPF. They were distributed as Contributions follows: 60,2%

• Public entities (employers and employees): 36% • Self-employed: 2% • Other employers: 62% Legal aspects Employees pay 3% of their monthly gross income to the MLSPP, employers 18 February 1997 – Law “On Social 22%. They are in charge of transferring Insurance” № 250-IQ, which the entire contribution to the MLSPP determines the legal, economic and at the same time than the salary. organisational aspects of the social In the end, half of the contribution insurance. will go on the employee’s personal account. 27 November 2001 – Law “On Personal Accounts in the State Social Self-employed persons: 10 to 50% of Insurance System” № 221-IIQ, which the national monthly minimum wage regulates the data collection in the

20 Azerbaijan: Universal Pensions personal individual accounts for the the country’s economic positive provision of social security rights in results set conditions for improvement the future. in the socially oriented policy of the State. The social protection become 7 February 2006 – Law “On Labour a development priority of the Pensions” № 54-IIIQ, which government and the provisions are introduced the labour pension made in order to bring extremely law rights of citizens, rules for the but universal social benefits close to implementation and establishes a subsistence minimums. pension provision system. In 2001, with support of international organisations, the government 2 July 2013 – Law “On regulation adopted a 3-tier pension system of the checks which are carried reform concept, including a out to areas of entrepreneurships, reinforcement of basic pay-as-you-go and protection of the rights of component, an additional mandatory entrepreneurs”, № 714-IVQ, which insurance part, and a third voluntary regulates the firms audit by the scheme. government. It determines the rights The second pillar was actually and the obligations of the inspection implemented in 2006 with bodies and entrepreneurs. introduction of individual accounts. The works on implementation of 2. How was this achieved? third pillar were under way during last years, however present economic Historically, Azerbaijan has inherited situation represent a serious obstacle universal soviet pension system for such development. which was critically underfinanced Furthermore, up to 2006 Azerbaijan during first years of independence. had universal child benefits coverage. Although the State Social Protection However, these allowances (extremely Fund was established in 1991, the low at that period) were transformed basic information for management into Targeted Social Assistance (safety of pension system was missing: net mechanism). employment records and employment Last reform has brought the State periods, income levels for workers Social Protection Fund (SSPF) under who used to live in other Soviet the responsibility of the Ministry of republics. Furthermore, the situation Labour and Social Protection of the was worsened by socio-political and Population (MLSPP) in March 2016. economical cataclysms of the early This reform is intended to render more 1990s and large number of Internally comprehensive the pensions system Displaced Persons. through better coordination between Starting from the beginning of 2000s, labour pensions and social allowances

21 Azerbaijan: Universal Pensions for the same categories of peoples. Furthermore, the government expects a reduction of administrative costs for the management of social protection system in the period of deficit of budgetary resources. The insurance and pension reforms led to the creation of a system including functions related to social insurance, personal accounting and pension provision. The following documents contain guidelines for future reform and improvements: a) Development Concept “Azerbaijan – 2020: The vision of the future” Article 7.3 sets the main goals of Overcoming constraints pension system, including voluntary social insurance and non-state The benefits adequacy in the social pension funds. protection system in Azerbaijan b) State Programme on Development represents an important issue. Although of the Insurance-Pension System the government has demonstrated in 2009-2015, was approved by a important efforts to bring the social Presidential Order in 2008. It aims protection benefits closer to the level at developing a viable system and of minimum subsistence standards ensuring its continuous improvement, of population between 2000 and and to guarantee a proper pension 2015, the last developments in the provision. economy of Azerbaijan have seriously c) Concept on the Pension Provision undermined these policies. System Reform in 2014-2020 was The economic crisis and high approved by the Order of the inflation rates IN 2015 can represent President of the Republic of an important threat, to the State Azerbaijan on 4 November 2014 capacity to deliver on the long-run No.827. It offers recommendations pensions indexed on prices. Thus, the based on international best practices subsistence minimums themselves and experiences, in order to establish where only partially indexed after the a robust pension system and provision devaluation of 2015. Scarce resources in the long run. will be accompanied by a larger demand in terms of beneficiaries impacted by the crisis but also in terms of pension amount.

22 Azerbaijan: Universal Pensions

Table 2. Azerbaijan: Overview of key social, economic and demographic indicators

Region Europe & Central Asia Income level Lower middle income Annual population growth (2014) 1.2% Population above 65 years old (2016) 5.6% of total population Life expectancy at birth for women/ men (2014) 71.6 / 76.8 HDI (2014) 0.751 [78/188] GDP (in billion current US$, 2015) 53,047 GDP growth (2015) - 1.1 % GDP per capita (current US$, 2015) 5 496,34 GNI per capita, Atlas method (current US$, 6560 $ 2015) General government final consumption 12,51% expenditure (% of GDP) Minimum wage 105 AZN Average salary in 2015 466,9 AZN Labour force participation rate (% ages 15 and 66.1% older, 2015) Employment to population ratio, ages 15-24, 30.4% total (%) (modelled ILO estimate) Number of economically active population – 4915,3 thsd. Persons Unemployed persons, thsd. Persons 243,7 People benefiting from unemployment benefits 1543 1 494 106 (87 % through labour pensions Number of pensioners and others through social allowances) People benefiting from an old age labour 785 068 pension Amount of old-age social allowance 66 Azn Amount of survivor social allowance 61 Azn Amount of basic-flat rate benefit for old-age 110 Azn labour pension Amount of the minimum pensions 110 Azn allocated Poverty rate (2015) 5% Urban population (2015) 54,62% Sources: World Development Indicator (WB/WDI) Human Development Indicator (UNDP/HDI) The State Statistical Committee of the Republic of Azerbaijan

23 Azerbaijan: Universal Pensions

Indeed, annual level of consumer forecasts show that if the present price index defined by corresponding trend will continue, the number of executive body is taken into beneficiaries of social allowances consideration in case of re- will raise because important part of establishing basic part of old-age population will note have any rights labour pension. The insurance part of to labour pension2. a labour pension and pension capital accumulated in the insurance part 3. What are the main results of a personal account are indexed at in terms of impact on people’s least once a year to the level of the lives? consumer prices index established by the appropriate executive body. Economic results demonstrated The social insurance pensions by Azerbaijan since 2000s due to financing represent several concerns. positive dynamics of energy prices According to pension reform concept, have enabled the Government to the public budget was responsible for achieve an improvement of citizen’s the financing of pension liabilities for well-being, through reinforcing the the period of rights acquired before qualitative aspects of the social 1992. However, in reality the public protection system and economic budget covers only the difference development, based on international between benefits which should be best practices. However, it is necessary paid as labour pensions and the to further develop a comprehensive contributions collected through insurance and pension system that pensions system. In this regards, the reflect the country’s economic and effective introduction of third pillar of social situation. the pension system is difficult. During the recent years a number of During last years the country has important measures were taken in made a range of important efforts the area of improving the standards in coverage of population by social of living of the population, serious insurance mechanisms. If in 1990s the steps were made in the direction of most of population was unaware of improving the pension provision of existence of pension system and was the citizens. reluctant to pay any contributions. At According to the studies made in present, most of employed persons 2009, the social protection system had in Azerbaijan are covered by social a very positive impact on the absolute protections system. However, the poverty reduction. Thus, the universal informal economy and self-employed social protection system had reduced persons represent an important the absolute poverty rate from 30.9% impediment in further extension of to 10.9 %, with special positive impact social security coverage. The actuarial ² See Durin & Tretyak (2012)

24 Azerbaijan: Universal Pensions of old-age and disability pensions3. based on actuarial calculations and Although the more recent figures statistical data, with the corresponding were not found, the positive impact action plan. Harmonization of pension of universal social protection system schemes with the country’s socio- on poverty elevation remains strong. economic development, as well as building and strengthening capacity 4. What’s next? should enable Azerbaijan to define the long-term development priorities Now that the first two tiers of of these systems. the system (fixed allowance and insurance) are well established, This Universal Social Protection brief Government plans to develop a third was produced by Olivia de Vendeuvre pillar, based on savings, as stipulated of Expertise France. It was reviewed by in the pension provision reform Andrei Tretyak of Expertise France, and concept and in the development Isabel Ortiz, Mariko Ouchi and Loveleen concept Azerbaijan 2020. This would De of the ILO. diversify the financial sources of the pension system and thus its sustainability, while allowing higher pension rates. This pillar should References nonetheless be developed taking carefully into account the inflation Azerbaijan State Social Protection Fund web- rates, economic situation and stability page: www.sspf.gov.az of financial markets. Even if MLSPP has made great ILO (1999), Republic of Azerbaijan: Prelim- progresses in the modernisation of inary Assessment of the Social Protection its controls functions, the system still System. fails to cover all medium and large insurers, and control are highly time- International Social Security Association consuming. In this regard, the MLSPP (ISSA) webpage: www.issa.int (and SSPF as part of its structure) is planning to develop an automated Fan, Lida; Habibov, Nazim; ISSA. fiscal control (e-audit) system Blackwell Publishing. 2007. “Social protec- crossing the various public database, tion and poverty in Azerbaijan, a low-income in order to reduce the time spent on country in transition: implications of a house- audits and develop automatic alert hold survey”, (International Social Security mechanisms, for all types of insurers. Review, N° 4, vol. 60, p 47-68 (October/De- Finally, a sustainable pension system cember 2007)) requires sound analysis mechanisms

³ Studer (2012)

25 Azerbaijan: Universal Pensions

Durin, F & A. Tretyak (2012), “Disabled peoples in Azerbaijan: model for projections and long-term trends”, Social Protection in Azerbaijan N°4

Studer, N (2012), “Fight against poverty in Azerbaijan”, Social Protection in Azerbaijan N°5

26 Bolivia Main lessons learned • Bolivia’s Renta Dignidad Universal Pensions programme shows that universal social protection for older persons is achievable, even in developing countries.

Renta Dignidad (“Dignity • This non-contributory social Pension”): Making the social protection programme has a protection floor a reality for all significant impact on poverty older people reduction for older persons and other family members living Despite having the lowest GDP per with the elderly; ithas reduced capita in South America, Bolivia has poverty by 14 percentage points. achieved one of the highest coverage rates in old-age pensions. With the • Political will and the government’s introduction of the non-contributory commitment are essential. In particular, increasing fiscal space old-age pension Renta Dignidad in is indispensable to significantly 2007, Bolivia closed coverage gaps and extending old-age pension achieved universal coverage. coverage. Renta Dignidad is Renta Dignidad costs around 1 per cent financed by revenues from of the country’s GDP and is financed natural hydrocarbon resources. by public revenues generated from taxes on oil and gas production and • Renta Dignidad is administered dividends from a group of state-owned by the Ministry of Economy and companies. Public Finance but the Bolivian The impacts of Renta Dignidad on Armed Forces have also played people’s lives are remarkable. For a critical role in achieving higher example, the programme led to a coverage rates in remote rural areas. There are over 200 reduction in the poverty rate by 14 payment points installed in percentage points at the household military facilities and its mobile level. Renta Dignidad has secured units. the incomes and consumption of beneficiaries, reduced child labour, • By boosting local demand, and increased school enrolment. In stimulating the rural economy, households receiving the benefit, child and improving civil registration labour has been halved and school in rural areas, the universal old- enrolment has reached close to 100 age pension is a driver of growth per cent. and development.

27 Bolivia: Universal Pensions

1. What does the pension These amounts represent 38 per cent system look like? of the poverty line and 21 per cent of the minimum wage, respectively. Renta Dignidad is a universal programme, i.e. there are no Financing conditions or means tests to receive the benefit. Along with the country’s The scheme’s cost (benefits plus conditional cash transfer programmes, administrative costs) amounts to Bono Juancito Pinto (for school roughly 1 per cent of GDP. It is financed children) and the Bono Juana Azurduy from two sources: resources derived (for expectant and new mothers from a direct tax on hydrocarbons and their infants), Renta Dignidad is and dividends from nationalized another step forward towards creating public enterprises that are earmarked a national social protection floor. to finance the Renta Dignidad. The Government’s revenue from the Key figures exploitation and sale of hydrocarbons has increased tremendously. This in turn • Renta Dignidad reaches 91 per has brought about a significant increase cent of the population over the in fiscal revenues and hence fiscal space age of 60. for financing social protection. • The monthly benefit amount is 250 bolivianos (BOB) (US$35.9) Legal aspects for beneficiaries without a contributory pension. BOB200 Renta Dignidad was established in ($28.7) is paid to recipients of the 2007 by Act No. 3791, replacing contributory scheme. the previous social pension scheme • Involvement of the armed forces known as BONOSOL. The benefit is has played a critical role to guaranteed under the Constitution achieve higher coverage rates in of 2009, which states that “all older rural areas. persons have the right to a dignified old age, with human quality and warmth. The State shall provide Benefit packages a lifelong old-age pension in the framework of the integrated social The monthly benefit amount for security system, as stipulated by retirees who are not part of the legislation.” Eligible beneficiaries contributory pension scheme was must be at least 60 years of age, be raised in 2013 to BOB250 ($35.9) and a Bolivian or naturalized citizen, be to BOB200 ($28.7) for those covered domiciled in the country, and have a by the contributory pension scheme. national identity document.

28 Bolivia: Universal Pensions

Institutional arrangements for generated by these enterprises delivery were earmarked to finance the Renta Dignidad. Second, in 2006, Renta Dignidad is administered by the Government renationalized the the Ministry of Economy and Public hydrocarbon sector and recovered Finance with cooperation from the ownership and control of the country’s military and the national banking natural hydrocarbon resources. The system in the delivery of benefits. allocation of revenues from this sector The pension is paid on a monthly was renegotiated with an 82 per cent basis. The payments are made in share of revenues going to the State more than 1,100 payment centres and 18 per cent to private companies. across the entire country, including This allowed for the creation of fiscal branches of financial institutions space for financing social protection. and National Armed Forces payment centres. Involvement of the armed Figure 1. Cost of Renta Dignidad in percent- forces has played a critical role in age of GDP reaching high coverage rates in remote rural areas. There are more than 200 payment points installed in military facilities and its mobile units. All military mobile units are equipped with mobile satellite dishes. The centralized database of beneficiaries can be accessed from any place in the country, allowing beneficiaries to collect their pensions anywhere. Source: APS. Estadísticas 2014. 2. How was this major breakthrough achieved? 3. What is the impact on people’s lives? Consolidation of Renta Dignidad as a universal social pension can be Outcome explained by two main factors. First, in the course of privatizing public Renta Dignidad is the first, and so far enterprises in 1995, half of the shares only, universal pension programme in of these companies were sold to Latin America. The effective coverage foreign investors, while around 48 rate reaches more than 90 per cent of per cent were granted to Bolivians people over the age of 60. 21 years of age or older. After the renationalization, the dividends

29 Bolivia: Universal Pensions

Impact on people’s lives Introduction of the Renta Dignidad programme, replacing the previous Renta Dignidad led to a reduction in BONOSOL, reduced the minimum age the poverty rate at the household for pension eligibility from 65 to 60, level by 14 percentage points. The bringing out a significant expansion in pension stabilizes households’ coverage between 2007 and 2008. incomes and contributes to boost consumption levels. Positive impacts on child labour and education are Impact on the economy also significant. A study conducted by UDAPE (Escobar Loza et al., The impact of social pensions on local 2013) shows that children living in development and formalization is households receiving Renta Dignidad well known. Before the introduction benefits are less likely to be working of the Renta Dignidad, there were (a reduction of 8.4 percentage many people of all ages without points) compared to children in national personal identification households that do not benefit from (ID) documents in rural areas. The Renta Dignidad. Meanwhile, school registration campaign conducted by enrolment rates were 8 percentage the programme reached members points higher in households receiving of households of all ages, including the social pension, making the working-age people. The growing enrolment rate close to 100 per cent number of people with personal for this group. IDs and the positive impacts of the social pension on local demand for Figure 2. Number of Renta Dignidad goods and services in rural areas have beneficiaries contributed to the formalization of the rural economy.

4. What’s next?

Bolivia has made significant efforts to universalize its social pension system. The Government is now focusing on improving the administrative and financial governance of the

Source: APS. Estadísticas 2014. programme, improving the adequacy of benefits, as well as creating complementary linkages with other social protection programmes. Next steps include:

30 Bolivia: Universal Pensions

1. overcoming administrative issues to cover the remaining 10 per References cent of older persons who are not yet part of Renta Dignidad; Autoridad de Fiscalización y Control de Pensiones y Seguros. Estadísticas. Available 2. maintaining and improving fi- at: www.aps.gob.bo/estadisticas/Paginas/ nancial governance in order to Renta-Dignidad.aspx. ensure the sustainability of the programme in the long run; Durán-Valverde, F.; Pacheco, F. 2012. Fiscal space and the extension of social protection: 3. exploring options for increasing Lessons learnt from developing countries (Ge- the benefit level, which remains neva, ILO). Available at: www.social-protec- modest; and tion.org/gimi/gess/RessourcePDF.action?ressource.ressourceId=34168. 4. continuing to strengthen the coordination mechanisms with other so- Escobar Loza, F.; Martínez Wilde, S.; cial protection programmes. Mendizábal Córdova, J. 2013. El impacto de la Renta Dignidad: Política de redistribución del Bolivia’s Renta Dignidad is a successful ingreso, consumo y reducción de la pobreza example of guaranteeing universal en hogares con personas adultas mayores social protection for older persons. (La Paz, UDAPE). Available at: www.udape. Such achievements would not have gob.bo/evaluaciondeimpacto/12_Documen- been possible without the strong to_Impacto%20Renta%20Dignidad.pdf. political will and commitment of the Government to universalize the ILO. 2012. Social Protection Floors Recom- coverage of social pensions and secure mendation (No. 202). Available at: www. financing sources for universal social ilo.org/dyn/normlex/en/f?p=NORMLEXPU- protection policies. B:12100:0::NO::P12100_ INSTRUMENT_ ID:3065524. This Universal Social Protection brief was produced by Fabio Durán-Valverde and —. 2014. World Social Protection Report Tomas Barbero of the ILO. It was reviewed 2014/2015: Building economic recovery, inclu- by Rocco BUSCO of the European sive development and social justice(Geneva). Commission, Charles Knox-Vydmanov of Available at: www.social-protection.org/gimi/ HelpAge, Isabel Ortiz and Valérie Schmitt gess/ShowTheme.action?th.themeId=10. of the ILO.

31 Bolivia: Universal Pensions

Ticona Gonzales, M. 2011. “The Dignity Pension (Renta Dignidad): A universal old- age pension scheme”, in Sharing Innovative experiences, Successful Social Protection Floor experiences (New York, ILO/UNDP/ Global South-South Development Academy). Available at: www.unicef.org/eapro/innova- tive_experiences.pdf.

32 Main lessons learned

Botswana • A stable and competitive political Universal old-age pensions system, a consistently growing economy, carefully managed national finances and a strongly- entrenched ‘social compact’ have provided highly supportive Botswana’s social protection (SP) conditions for the building of Botswana’s SP system over a programmes, including its universal, period of 50 years, including the noncontributory old age pension, introduction of a universal old are among the most extensive in age pension. continental Africa. At the same time, its efforts are among the least • The universal pension and other recognized. This is due in part to the SP programmes have contributed country’s small population; the fact substantially to the reduction that programmes are funded almost in overall levels of economic entirely from national revenues; poverty and related deprivations. limited published documentation; Extreme poverty in Botswana and a lack of international donor was reduced from 23.4 per cent involvement. Botswana’s long in 2003 to 6.4 per cent in 2009- 10. The universal pension has also experience in extending social contributed to the maintenance protection to its citizens deserves to of a society with high levels of be more widely known. social harmony and cohesion.

• Short term responses to external shocks can also, under more broadly conducive conditions, provide impetus and opportunity for the expansion of routine SP measures.

• Institutionalizing the delivery of different SP measures within a range of government agencies has provided continuity and experience in implementation; but could benefit further from overall strategic coordination and stronger impact evaluation.

33 Botswana: Universal old-age pensions

national registration card or, where • Recent economic pressures have led necessary, by local assessment to greater emphasis on issues of committees with the assistance of efficiency as a means of boosting the Village development Committee. th sustainability of SP systems. The elderly who are infirm appoint Botswana shows that this can be a proxy to collect the cash transfer done without undermining the role of universal pensions as a key pillar on their behalf but need to fill a Life of an inclusive national vision based Declaration Form every 6 months and on social harmony and justice. they are assisted in their homes for this purpose. In 2012-13 the monthly payment The Universal Old Age Pension was raised by 15% to compensate for inflation and in that year its total Botswana’s old age pension was cost was Pula 279 million, equivalent introduced in 1996 as a universal to some US$ 34 million or roughly 0.2 benefit from the start. It provides a per cent of Botswana’s GDP. monthly cash transfer to all citizens aged 65 and above, who make up Table 1. Botswana Universal State Pension: about 4.5% of the total population. The beneficiaries and expenditure number of beneficiaries is very close Year Pension Benefit Expenditure to 100% of the estimated population beneficiaries (Pula) (Pula, mil) in this age group, confirming a very 2009-10 96,118 220 239 high take-up. Monthly benefits are 2010-11 94,252 220 240 set at a level, equivalent to around 2011-12 91,385 220 249 US$ 30, which is estimated at just 2012-13 93,639 250 279 over a third of the food poverty line. 2013-14 98199 250 304 This is arguably both quite modest 2014-15 100,471 300 304 and sustainable. 2015-16 102,323 330 394 Transfers are made by the Source: World Bank / BIDPA and Ministry of Local Ministry of Local Government and Government and Rural Development – Department Rural Development through the of Social Protection Department of Social Protection to Post Office accounts. The beneficiaries There is a 10% budgetary incremental use smartcards to redeem their dues needs every year due to the increase in at any Post Office or mobile Point of the lifespan of the elderly attributed to Sale Device. These are quite easily good and free healthcare for the elderly. accessible to a population which is mainly concentrated in large villages and towns. Beneficiaries are verified through a

34 Botswana: Universal old-age pensions

1. How was this achieved? late 1970s and early 1980s. The introduction of the universal pension At the World Summit for Social was followed by benefits for orphans Development which was held in March and vulnerable children in 1999. 1995 in Copenhagen, Governments Botswana’s highly stable political reached a new consensus on the system, civil service continuity need to put people at the centre of and the rapid growth of revenues development. from diamond mining all helped to Social development emphasizes social provide a positive environment for inclusion and social integration, not the expansion of SP programmes. only support to the needy. It covers Prudent fiscal management and the issues such as ageing, civil society, accumulation of currency reserves cooperatives, disability, employment, have enabled the maintenance of family, indigenous peoples, poverty, SP commitments in times of serious social integration, social protection and economic shock, such as 2008-09, youth. It builds on notions of individual without the need for recourse to donor and community rights and entitlements, funding. A strong ‘social compact’, in as well as on the state’s responsibilities which persistent wealth inequalities to all its citizens. are balanced by redistributive and Social protection in Botswana was basic service programmes, aimed built through the gradual introduction at achieving poverty reduction and of individual measures over several human development Goals, has decades, within a highly stable and been reflected in successive national consistently-expanding national development plans and strategic budgetary and institutional framework. ‘vision’ documents. Social protection Deliberative policy-making, linked to a (or “safety nets”) has consistently tradition of village level consultations, been viewed by the Government as has provided the basis for most of a key pillar for achieving these Goals. these initiatives. Periodic multi-party ‘competitive bid’ New programmes have gradually elections have maintained a degree of extended coverage to additional pressure on the political leadership to vulnerable groups. Maternal and maintain and periodically expand the young child food supplements, with range and scale of SP benefits. The strong initial support from partners stability of SP programmes has further such as the World Food Programme, been founded on their incorporation were a feature of the early years after within central and local government independence in 1966. Universal agencies, in preference to setting up primary school meals, cash-for-work special implementing bodies. programmes and support to people The SP system has also evolved in the in destitution were adopted in the wake of external shocks and trends,

35 Botswana: Universal old-age pensions such as severe droughts and the HIV/ Payment System AIDS pandemic. Adoption of the old age pension specifically reflected concerns Payments are made through the Post about the impact on older people of Offices which have a wide network and the weakening of inter-generational where there are no post offices, they support traditions as younger people are made at the KgotlaI (Community sought work in the cities. Botswana is meeting place). BotswanaPost notable in that grandparents and other sets payment schedules which are relatives often play a direct role in the communicated by the Kgosi (Chief or care and education of young children, local leadership) and they come on particularly when parents have those set date to pay the elderly and migrated for work. To some extent, also, beneficiaries of other cash transfers. Botswana’s policy-makers may have The Point of Sale Device uses drawn upon examples of near-universal the Biometric information of the pension systems in the wider southern beneficiary. At the initial registration African region, notably the national of the beneficiary, their biometric data programmes in independent Namibia is captured and they have to use their and post-apartheid South Africa. finger (biometric data) as password for the release of funds. Administrative structure 2. What are the main impacts The Ministry of Local Government on people’s lives? and Rural Development through the Department of Social Protection Extreme poverty in Botswana was computes a payroll every month estimated at 6.4 per cent in 2009-10, a and sends it to BotswanaPost with reduction from 23.4 per cent in 2003. the equivalent payroll total cash for However, general poverty was still payment of beneficiaries countrywide. estimated at 19.3 per cent and stunting among young children at around 30%. The pension and other SP programmes, complemented by drought response and recovery measures, have undoubtedly contributed substantially to the reduction in overall levels of economic poverty and related There are Pension Officers in the deprivations. The SP system has quite districts who attend to the queries reliably directed resources towards of the elderly and refers them either meeting basic consumption needs and to Headquarter or BotswanaPost for for nutritional, educational and other appropriate action. human development investments.

36 Botswana: Universal old-age pensions

Arguably, it has also contributed to national budget, the intensifying the maintenance of a society with high fiscal pressures linked to fluctuations levels of social harmony and cohesion. in diamond revenues have raised However, very limited evaluation concerns around the financial work has taken place in the sector; sustainability of the current package of and the impacts for older people, SP measures. At the same time, this is their relatives and other beneficiary having a positive benefit of increasing groups have not been rigorously the Government’s focus on issues of assessed through either quantitative programme efficiency and impact. or qualitative means. More broadly, Botswana is now Some analysts suggest that there may considering the ways in which the be considerable scope for obtaining different components of its SP greater impacts for Botswana’s framework could be more tightly poverty reduction and human woven into a strategic whole. This development Goals from its existing is taking place within the wider SP spending. This could be achieved, objective of building a more coherent for example, through stronger and effective poverty eradication inter-agency coordination and the strategy, supported by better data utilization of a unified national social and research on the causes of poverty protection beneficiary registry. This than exists at present. could facilitate impact monitoring, the Major policy concerns are centred on introduction of more efficient delivery the desire to promote greater self- methods. In the case of the old age reliance (ipelegeng) among citizens pension, however, the simple, clear who are “able to help themselves”. This and universal approach appears to is balanced by the need, articulated in deliver a modest but reliable benefit the national “Vision 2016” statement, which continues to be of particular to maintain a “compassionate and importance to recipients in the caring society”. While these concerns greatest need. may lead to adjustments in existing programmes, the greater benefits 3. What’s next? for Botswana’s national objectives to eradicate poverty and improve income Since the global financial crisis of distribution are likely to flow from a 2008-09, Botswana has faced several strategic vision for Social Protection years of reduced economic growth that continues to reflect the principles and budgetary constraint. Botswana’s of consensus-seeking and social justice diamond production capacity is on which this society is based. The also in medium-term decline. While universal old age pension is a strong spending on social protection is not and central expression of this vision. a major component of GDP or the

37 Botswana: Universal old-age pensions

This Universal Social Protection brief World Bank and Botswana Institute for was produced by Richard Morgan of Development Policy Analysis (BIDPA), Save the Children, Isabel Ortiz of the ILO 2013, Botswana Social Protection Analysis and Ruth Radibe of the Ministry of Local (Washington DC; Gaborone) Government and Rural Development of Botswana. It was reviewed by Kagisanyo Kelobang and Loveleen De of the ILO.

References

Botlhale, E, Mogopodi, L, Mothusi, B, Motshegwa, B, 2015, A Political Economy Analysis of Social Protection Programmes in Botswana, Partnership for African Social and Governance Research Working Paper No.001 (Nairobi)

Ministry of Finance and Development Planning, 2013, Mid Term Review of the Tenth National Development Plan, (Gaborone)

Presidential Task Force, 2009,A Long Term Vision for Botswana (Vision Council 2016), Gaborone

Morgan, R, 1991, State pensions as an income safety net in Namibia, Food Policy Journal

Morgan, R, 2015, “Who is looking after the children?”, in Facing the facts: The truth about Ageing and Development, Age International (London) White, P, Devereux, S, 2011, “Social Protection in Botswana – a Model for Africa?”, Regional Hunger and Vulnerability Programme, www.wahenga.net

38 Brazil Main lessons learned Coverage Universal old-age pensions The expectation that increasing coverage of social insurance would eventually lead to universal old-age coverage proved to be too 1. What does the system look optimistic. Almost universal old- like? age coverage in Brazil relies on a combination of contributory, semi- Structure of the overall system contributory and non-contributory benefits. The Brazilian social protection system integrates different contributory and Adequacy of benefits non-contributory strategies to achieve relatively high coverage in terms of The adequacy of benefits is an important element to prevent people covered at old age (see Table older people from continuing to 1). This policy brief is particularly live in extreme poverty. In Brazil, interested in old-age pension coverage both semi- and non-contributory in the country, which is supported by schemes pay relatively high two large contributory regimes and a benefits, whose value is one (non-contributory) social assistance minimum wage. This means that scheme. Civil servants and workers unskilled workers tend to have a from the private sector (including the replacement rate close to 100 per self-employed) have independent cent. Extreme poverty among older regimes—the Special Regime of Social people is negligible (0.4 per cent). Security and the General Regime of Social Security, respectively. Sustainability of the system Although mainly contributory, the The rising costs of the system— General Regime also features a semi- much higher in Brazil than contributory component targeted at one would expect based on its smallholder farmers and rural workers. demographic structure—is cause These regimes are supplemented by for concern, especially regarding a social assistance scheme that grants benefits paid to people under means-tested benefits (Benefício de 60 years of age. Rapid ageing Prestação Continuada – BPC) to older has put more pressure towards people (men and women aged 65 or a pension reform—the third one over) and to people with disabilities of its kind since the country’s re- (irrespective of age). democratisation in 1984.

39 Brazil: Universal old-age pensions

Coverage cover most of the expenditures, but since both regimes are faced with Taking into account both social deficits, social contributions (mainly security and social assistance benefits, composed of consumption and the country has nearly universal old- corporate income taxes) also finance age coverage: as of 2014, 89.2 per the system. Social contributions also cent of those aged 65 and over have finance the social assistance scheme. received a social security or social Smallholder farmers and rural workers assistance pension, according to the pay a tax on sales of agricultural National Household Sample Survey produce (if any). (PNAD/IBGE, 2014). Legal aspects Benefits Both contributory and non-contributory Both contributory regimes provide schemes are defined in the Federal coverage for old age from ages of 65 Constitution and in specific Laws (cf. (men) and 60 (women). Smallholder Table 1). farmers and rural workers in the semi-contributory scheme are also Institutional arrangements covered from ages of 60 (men) and 55 (women). BPC covers for old age Social security and social assistance from the age of 65 for both men and benefits are managed by the National women. Institute of Social Security (INSS), a Benefit levels are earnings-related Central Government institution. The for contributory regimes and the INSS has offices in 1,500 municipalities minimum benefit level is equivalent (out of the country’s total of 5,570). to one minimum wage. Smallholder farmers and rural workers are entitled to a flat-rate 2. How was this achieved? benefit, equivalent to one minimum wage. Social assistance benefits are also flat- Political economy rate, corresponding to one minimum wage. Up until the early 1970s, the Brazilian social protection system continued to Financing rely fundamentally on social insurance schemes, which were introduced in the Contributory benefits are financed by 1920s for railroad workers and were the employed and employers on a pay- expanded since then, gradually covering as-you-go basis. Payroll contributions the entire formal labour market and a

40 Brazil: Universal old-age pensions

Table 1. Main aspects of the old age social protection coverage in Brazil

Non-contributory social Contributory Social Protection protection

Special Regime General Regime of Social of Social Security Security Traditional social assistance Regime/ Regime/ programme

Poor older people and the Civil servants Private sectors workers disabled Potential beneficiaries

89.2 per cent (65+) Old age Old age coverage coverage

Urban workers at the ages of 65 (men) and 60 At the ages of (women). 65 (men) and 60 Smallholder farmers and At the age of 65 (women)

entitlement rural workers at the age of

of – age Benefits 60 (men) and 55 (women)

General rule: earnings related. Basic value: minimum wage (R$ 880) Rural pensions: one One minimum wage (R$ 880) level

Benefit minimum wage (R$880)

PAYG. Payroll contributions and social contributions Social contributions (corporate (corporate income tax and tax on goods and income tax and tax on goods services). and services) Financing Rural pensions: tax on sales of agricultural produce.

Fed. Constitution, Art. Fed. Constitution, Art. 201. Fed. Constitution Art. 203 Law Legal Legal 40. Law n° 8.112 Laws n° 8.212 and n° 8.213 n° 8.742 reference

Central, State and local National Social Security National Social Security administrations Institute – INSS Institute – INSS Institutions the operation responsible for for responsible

Source: Author’s elaboration.

41 Brazil: Universal old-age pensions small portion of the self-employed. In was going through a very difficult the 1970s, the first semi-contributory economic period, deeply affected by schemes emerged, covering poor older hyperinflation, but the end of 20 years of people and disabled people, on the dictatorship allowed for the construction one hand, and smallholder farmers, on of a new social contract, established in the other. These schemes used to pay the Constitution of 1988, where poverty benefits at a lower level compared to and inequality reduction was considered contributory social insurance benefits one of the main objectives of the nation. and limited women’s access to rural It was in such a context that the almost pensions: (i) both schemes used to pay strictly contributory nature of social a flat-rate benefit equivalent to half protection in Brazil was changed by the a minimum wage; and (ii) only one enhancement of non-fully contributory benefit could be paid to each family of schemes (Barrientos, 2013). smallholder farmers and rural workers. As a consequence of the new Since it was usually men who applied Constitution, in the first half of the for the benefit, women remained largely 1990s the existing semi-contributory uncovered. Benefits paid to poor older schemes saw improvements in both people and the disabled required at their coverage and benefit levels. Poor least one year of contribution to social older people and disabled people insurance (or a single contribution, if were finally eligible for a proper non- paid after the age of 65). Due to these contributory social assistance benefit. By light contribution requirements, these the same token, access to rural pensions benefits did not fit precisely into the became strictly the same for men and category of social assistance. women. Contributions for rural pensions The expansion of old-age coverage continued to be based on sales of in the 1970s (with the emergence agricultural produce (if any). Both semi- of the first semi-contributory and non contributory schemes started pensions) occurred amid a period to pay a flat-rate benefit equivalent to of fast economic growth and lack of one minimum wage. democracy. The country was in the Old-age coverage (the percentage of middle of a long period of military people aged 65 or over receiving a dictatorship (1964-1984), and pension) was just above 80 per cent in experiencing double-digit yearly GDP the early 1990s (see Figure 1) and rapidly growth rates. The emergence of these increased in the first years of the 1990s, schemes may be interpreted as an act reaching almost 90 per cent. This increase by a non-democratic regime to seek was predominantly driven by women’s legitimacy. access to old-age pensions. While In the second half of the 1980s, the old-age coverage for men increased political and economic context was only 4.1 percentage points between substantially different. The country 1992 and 2014, old age coverage for

42 Brazil: Universal old-age pensions

women increased more than threefold Figure 2. Working age social security (by impressive 12.8 percentage points) coverage—percentage of population aged over the same period. The difference 16 to 59 covered by a contributory or semi- between coverages of men and women, contributory scheme (1992-2014) which used to be of 14.2 percentage points in 1992, decreased to only 5.5 percentage points in 2014; however, coverage remained higher for men. What to expect from differences in old age social protection coverage for men and women in the future? The difference tends to be even smaller than today’s, simply because social security coverage rates for working-age men and women have become very similar in recent years, until they became the same in 2014 (see Source: National Household Sample Survey— Brazilian Institute of Geography and Statistics Figure 2). (IBGE), several years.

Figure 1. Old-age social protection coverage: 3. What are the main results? percentage of population aged 65 or over that receives a pension (1992-2014) Impact on people’s lives

The system has been effective in reducing extreme poverty among older people. Considering the World Bank’s extreme poverty line of USD1.90 PPP a day, poverty among people aged 65 and over in 2014 was negligible (0.4 per cent), even more when compared to the 7.2 per cent extreme poverty rate found for children 15 years old or younger.

Source: National Household Sample Survey— Despite efforts made in the last dec- Brazilian Institute of Geography and Statistics ade (including the implementation of (IBGE), several years. Bolsa Família, a social assistance programme which targets families with children), poverty rates for those aged 15 years or under continue to be almost twice as high as the average and almost 20 times higher than for older

43 Brazil: Universal old-age pensions

people (see Figure 3). Overcoming constraints Figure 3 also suggests what could hap- pen in Brazil if social security and social Although the Brazilian social protection assistance benefits were extinguished: system has produced remarkable the extremely poor would comprise results in terms of high coverage and 13.2 per cent of population (rather than very low extreme poverty for older the observed 3.9 per cent) and extreme people, and taking into account the poverty would dramatically affect older fact that social benefits tend to have a people during a period when they are relevant effect on the overall economy, no longer able to generate income. the costs of the system have become an increasing concern. As of 2013, Impact on the economy expenditures with social security and traditional social assistance benefits These transfers also have an impact on (excluding Bolsa Família) represented the economy as a whole. The multiplier 12.3 per cent of GDP (see Table 2), an effect of expenditures in government unexpected cost for a country with a transfers on GDP computed by relatively young demographic structure. Mostafa et al. (2010) are above 1 for: social assistance benefits paid to older Table 2. Expenditure with social protection people and the disabled (1.38); and benefits—Brazil, 2013 benefits paid by the General Regime of Social security benefits – 209.5 4.0% Social Security (1.23). This means that civil servants (A) a marginal increase of 1 per cent of Social security benefits – GDP in expenditures for these benefits 357.0 7.4% would produce an increase higher private sector (B) Social assistance benefits than 1 per cent in GDP. 31.8 0.7% (C) Unemployment Figure 3. Extreme poverty in Brazil (USD1.90 31.3 0.6% insurance (D) PPP/day) with and without social security and social assistance benefits, by age—2014 Abono Salarial (E) (salary bonus –passive 13.5 0.3% employment policy) Bolsa Família (F) 24.0 0.5% Total (A+B+C+D+E+F) 667.1 13.8% Social insurance + social assistance benefits 598.3 12.3% (A+B+C) GDP 4,844.8 100%

Source: Brazilian Ministry of Planning and the Brazilian Institute of Geography and Statistics (IBGE). Source: National Household Sample Survey—Brazilian Institute of Geography and Statistics (IBGE). 2014.

44 Brazil: Universal old-age pensions

Brazil is a clear outlier when compared Expenditures with social insurance to other 86 countries in Latin America have been increasing relatively and the Caribbean, North America, quickly. For benefits paid by the Europe, Oceania and Asia. Slightly General Regime alone, expenditures over 10 per cent of Brazil’s population increased an additional 2.5 per cent is aged 60 or over, yet the country’s of GDP since the first half of the expenditures with pensions is similar 1990s. The forecast for the next 45 to countries with 25 per cent of their years suggests an increasing burden population belonging to this age for society, since Brazil (as most group (see Figure 4). countries in Latin America and the Caribbean) is experiencing a process Figure 4. Social pension expenditures as a of ageing that is expected to be percentage of GDP and as a proportion of twice as fast as the one that was people aged 60 or over (Brazil as of 2010) experienced by developed countries. The percentage of the population aged 60 or over is expected to increase from 10 percent to 20 per cent over only 25 years in countries of Latin America and the Caribbean— compared to an average period of 50 years for member countries of the Organisation for Economic Co- Operation and Development (OECD). All the evidence suggests that a pension reform is necessary to keep Source: for Brazil: Ministry of Social Security (expenditures of the General Regime of Social the system financially sustainable. Security and old-age social assistance pensions), This reform would be the third one of Ministry of Finance (expenditures of the Special Regime of Social Security) and the Brazilian Institute its kind after the re-democratisation of Geography and Statistics (demographic data). Other countries: World Bank and the United Nations. of the country: pension reforms were

Table 3.Key indicators: Brazil social security and traditional social assistance benefits (excluding Bolsa Família)

Number of persons 16.8 million people aged 65 or over (as of 2014). covered Source: National Household Sample Survey, 2014. Low-paid beneficiaries have 100 per cent replacement rate, since the Adequacy of basic level of social security benefits and the level of social assistance benefits benefits is equivalent to one minimum wage.v The overall expenditure with social security and social assistance Sustainability of benefits was over 12 per cent of GDP as of 2013, which is substantially the system higher than expected for a demographically young country. Source: Author’s elaboration.

45 Brazil: Universal old-age pensions conducted in 1994-1998 (General Regime) and in 2003 (Special Regime) (Caetano et. al., forthcoming).

This Universal Social Protection brief was produced by Luis Henrique Paiva, Researcher at the Institute for Applied Economic Research (Ipea) and Associate Researcher at the International Policy Centre for Inclusive Growth (IPC-IG), UNDP. It was reviewed by Isabel Ortiz and Loveleen De of the ILO.

References

Barrientos, Armando. “The rise of social assistance in Brazil” (2013). Development and Change Vol 44, No 4.

Caetano, M., L. Rangel, E. S. Pereira, G. Ansiliero, L. H. Paiva & R. N. Costanzi (forthcoming). O fim do fator previdenciário e a introdução da idade mínima. Texto para Discussão. Brasília: Ipea.

Mostafa, Joana, Pedro H. G. F. de Souza & Fábio Vaz. 2010. “Efeitos econômicos do gasto social no Brasil”. In Perspectivas da política social no Brasil, organised by Jorge A. de Castro et al. Brasília: Ipea.

46 Main lessons learned

Cabo Verde • The case of Cabo Verde shows that rapid progress towards Universal Pensions the universalization of pension systems is feasible and affordable in developing countries. Strong commitment by the Government is a key ingredient. One step further in achieving social protection for all • The rapid expansion of pension coverage was achieved by Cabo Verde has given social combining contributory and protection a high priority on the non-contributory programmes. road to development, showing a way to combine growth with equity • The creation of a specialized in a context of scarce resources. management institution -the The country is now one of the most CNPS in Cape Verde- is a critical advanced nations in Africa in terms of factor to unify existing programs establishing a social protection floor. and keep the strategy on-track. Cabo Verde took two major steps • Sharing existing infrastructure towards a universal pension system: with other social protection the creation of the National Centre programmes and institutions of Social Pensions (CNPS) in 2006 and (post office services, local the unification of pre-existing non- governments and organizations, contributory pension programmes. and the private sector) allows This unified scheme guarantees basic pension schemes to cover more income security for the elderly over 60 people and save costs. years old, the disabled, and children with disabilities living in poor families. • The use of information Social pensions in Cabo Verde have technology further enables reduced the level of poverty and transparent, accountable, and sound management by creating vulnerability of its target population. It linkages between databases is also a concrete step in the direction for cross-checking of data and of establishing a more comprehensive reduction of duplicates. social protection floor. The social pension covers about 46 per cent of the population 60 years old and over, and the value of the benefit is near 20 per cent higher than the poverty line.

47 Cabo Verde: Universal Pensions

1. What does the system look like?

Cabo Verde’s social protection pension system is the responsibility of the Ministry of Youth, Employment and Human Resources Development. It includes three types of schemes: Benefit packages the non-contributory scheme (social pensions), the mandatory pension Beneficiaries of social pensions, scheme that covers both salaried including the elderly, children and workers and independent workers, other people with disabilities are and the complementary pension entitled to receive a monthly payment scheme. of 5,000 Caboverdian Escudos (CVE) The social pensions are managed or about US$65. by the National Centre of Social The pensioners also benefit from Pensions (CNPS). the Mutual Health Fund, which was established to subsidize the purchase of medicines from private pharmacies, up to an annual ceiling of 2,500 CVE. Figure 1. Structure of Cabo Verde’s pension The Mutual Health Fund also provides system a funeral allowance of 7,000 CVE.

Complementary Social Contributory Financing pensions Pensions pensions (voluntary) The social pensions cost nearly 0.4 per cent of GDP and MJEDRH: MJEDRH: Supervision Supervision Pivate are fully financed from the CNPS: INPS: companies general state budget, whereas Management Management Institutions the Mutual Health Fund is financed from beneficiaries’ monthly contributions of Old-age, Old-age, disability, disability, Private pensions 100 CVE per pensioner (a

Benefits survival survival mandatory contribution of 2 per cent of the social pension People in payment’s current value). Salaried, poverty, domestic & People with not covered independent contributory by the workers, & capacity contributory

Beneficiaries civil servants scheme

48 Cabo Verde: Universal Pensions

Legal Aspects of claiming the pension starts locally, either through the intervention of The CNPS, created in 2006, manages Local Development Centres (CDS) or the social pensions in an autonomous municipal governments. Applicants manner. To qualify for the social to the social pensions must complete pension for older persons, applicants a form for identification and must be resident in Cabo Verde, be 60 selection of beneficiaries, as well as years old or above, have an income provide some basic documentation. below the national official poverty Conditions for selection are verified line (4,123 CVE in 2007), and not to be by a social worker through a visit covered by any other social security to the domicile of the applicant. scheme. The process finishes at the CNPS headquarters with the selection of the Institutional arrangements beneficiaries. In order to introduce for delivery more transparency and enhance governance, a web-based application Social pensions are managed by the was implemented to manage all CNPS and paid through local post the processes and procedures, thus offices every month - rather than creating an integrated and consistent by the banking system in order to database. All ICT functions (software reduce the significant operational development, databases, and costs charged by banks. The process communications) are supported by

Figure 2. Organization of Cabo Verde’s social pension system

49 Cabo Verde: Universal Pensions

NOSI, a state company that centrally pension reached 46 per cent in 2010, manages the ICT of state institutions. among the highest levels in sub- This feature has allowed for significant Saharan Africa. In rural areas nearly 74 progress in integrating the CNPS per cent of people over 60 years of age databases with those of other social are protected by social pensions. The protection programmes run on the performance of CNPS is efficient with different islands that comprise the administrative costs estimated to be country. only 1.4 per cent of benefits.

2. How was this major Figure 3. Coverage rates of social pensions as a breakthrough achieved? percentage of people over 60 years of age

The CNPS was created in 2006 by merging two pre-existing non- contributory pension schemes. One of the main justifications for the creation of the CNPS was to reduce institutional dispersion in order to increase efficiency. In less than ten years, the social pension almost doubled its coverage by reaching out to women and people in rural areas. Considerable progress has been made in terms of administration Source: Estimates for 2010 based on CNPS reports. improvements since the creation of the CNPS. Impacts on people’s lives

3. What are the main results in In terms of coverage, the social terms of impact people’s lives? pensions have achieved their target. In 2013 more than 84 per cent of the Outcomes pensioners were 60 or more years old and 69 per cent were women. A Cabo Verde is close to universalizing large share of beneficiaries is women its pension system. When you add up living in rural areas, which is one of the contributory and non-contributory the most vulnerable groups in Cabo coverage, it is estimated that over Verde. 90 per cent of older persons receive The amount of the social pension a pension. According to CNPS, the (5,000 CVE) represents about 20 per percentage of the population over cent of per capita GDP and is near 20 60 covered by a non-contributory percent more than the poverty line. In

50 Cabo Verde: Universal Pensions other words, the value of the pension contributory schemes which so far is sufficient for a person to cease to are operating in a rather fragmented be in poverty. way.

4. What’s next? 3. continuing to improve IT and the administrative processes The amount of the social pension of identification and eligibility (5,000 CVE) represents about 20 per (including gathering best information cent of per capita GDP and is near 20 on people’s income), payment of percent more than the poverty line. In benefits, monitoring and evaluation. other words, the value of the pension Furthermore, an ideal scenario is is sufficient for a person to cease to that all institutions managing social be in poverty. protection benefits could use a single Cabo Verde has made significant system to perform those different efforts to extend its social pension functions. system and establish and consolidate its institutional capacity. There are still many challenges to face in order to achieve higher levels of effectiveness and efficiency. Some of these challenges include:

1. continuing to reinforce the linkages between contributory and non- contributory schemes in the areas of the benefits design, administration, Cabo Verde moved rapidly towards financing, delivery of services, and the universalization of its pension tools. system, providing adequate old-age benefits. Some critical elements 2. a key challenge is the creation that explain this achievement are: of a single register of vulnerable the strong political will to finance population and beneficiaries of social protection; the combination of social protection, which will allow contributory and non-contributory reducing administrative costs, instruments; the unification of higher cross control among social previously existing programs and their protection programmes, and consolidation into a single specialized therefore increasing effectiveness institution; the intensive and effective and efficiency of the whole system. use of information technology; and A desirable final result of such effort the importance given to administrative could be the integration the non- modernization.

51 Cabo Verde: Universal Pensions

This Universal Social Protection brief Pacheco, J. F.; Durán-Valverde, F.; Lucas, J. was produced by Fabio Durán-Valverde 2012. Diagnóstico do Centro Nacional de and Joana Borges of the ILO. It was Pensões Sociais de Cabo Verde (Praia, ILO reviewed by Pedro Lara de Arruda of the – STEP Portugal). Available at: www.social- International Policy Centre for Inclusive protection.org/gimi/gess/ShowRessource. Growth, Isabel Ortiz and Valérie Schmitt action?ressource.ressourceId=31268. of the ILO. Rodrigues Biscalha, M. 2013. Revisão dos processos para a seleção dos Beneficiários das Pensões Sociais em Cabo Verde (Praia, ILO References – STEP Portugal).

Durán-Valverde, F.; Pacheco, J.; Borges Henriques, J. 2012. A Proteção Social em Cabo Verde: situação e desafios [Social Protection in Cabo Verde: Situation and challenges - SPER] (Praia, ILO – STEP Portugal). Available at: www.social-protection.org/ gimi/gess/ShowRessource.action?ressource. ressourceId=42297.

ILO. 2011. Social Protection Floor in Cape Verde (Praia, ILO – STEP Portugal). Available at: www.social-protection.org/gimi/ gess/ShowRessource.action?ressource. ressourceId=25712.

—. 2012. Social Protection Floors Recommendation (No. 202). Available at: www. ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12 100:0::NO::P12100_INSTRUMENT_ID:3065524.

—. 2014. World Social Protection Report 2014/2015: Building economic recovery, inclusive development and social justice (Geneva). Available at: www.social-protection.org/gimi/ gess/ShowTheme.action?th.themeId=10.

52 China Main lessons learned • The Chinese experience shows Universal Pensions that universality can be achieved by combining contributory schemes and non-contributory social pensions, in line with Between 2009 and 2013, China tripled the Social Protection Floors the number of people covered by Recommendation, 2012 (No. the old-age pension system, making 202). impressive progress in achieving its • Extending pension coverage to goal of universal coverage by 2020. all citizens within a very short period is feasible. Figure 1. Expansion of old-age pension coverage over 2001-2013 • Political will and government commitment is essential. In particular, increasing government expenditure is indispensable for covering vulnerable groups that have no or limited capacity to pay contributions.

• Universal pensions, as part of social protection floors, increase domestic consumption and demand, promote human Source: Annual statistical bulletins on human development and social stability, resources and social security development (ASB), 2001-2013. all of which are fundamental for national development and 1. What does the pension economic growth. system look like?

Overall structure: The current state pension system consists of three schemes: (1) an urban workers’ pension; (2) a civil servants’ pension; and (3) a residents’ pension for rural and urban residents not covered under the first two schemes.

53 China: Universal Pensions

Benefits and financing However, the majority of the current generation of pensioners only receive Upon retirement, urban workers- re the SC component as they had already ceive a state pension consisting of two exceeded the pensionable age when components: a solidarity component the scheme was introduced. Unlike (SC) financed by employers’ contribu- the other two schemes, participation tions (accounts for about 20 per cent in the residents’ pension is voluntary. of payroll) and an individual pension The scheme is also composed of many component (IP) calculated based on a independent locally run sub schemes. worker’s accumulated contributions, where contributions are 8 per cent of Legal aspects a worker’s reference income. The urban workers’ pension scheme consists The legal framework of the pension system of hundreds of sub-schemes run inde- can be depicted as follows: pendently by local authorities, with Constitution of the PRC (current some sub-schemes in surplus and 1 version adopted in 1982) others in deficit. To secure full and on- Social Insurance Law (2010) and time payments of current pensions, 2 Labour Law (1995) the Government supplements many of these sub-schemes. 3 National Administrative Regulations Up until to October 2014, retired 4 Ministerial Rules civil servants received a single state pension based on their pre- 5 Local Administrative Rules retirement salaries and the number of years of service, paid directly out 6 Other Legal Provisions of the government unit budgets. The scheme is currently being converted into a social insurance pension with Institutional arrangements for two components similar to the urban delivery workers’ pension: an SC funded by employers’ contributions and an IP The pension schemes are managed funded by employees’ contributions. by local social insurance institutions. It remains to be seen whether it will Contributions are collected by become a single nationwide scheme. social insurance agencies or by tax The residents’ pension also consists authorities. Pensions are paid directly of two components. The SC is entirely to beneficiaries’ designated bank financed by the Government. The IP accounts. is financed by contributions of the insured as well as some government subsidies.

54 China: Universal Pensions

2. How was this major Administrative and social support breakthrough achieved? Progress towards universal coverage has Landmarks also been the result of strong leadership by the central Government and active Figure 2. Overview of events marking the development of new programme extension of pension coverage since 2009 initiatives by local governments. Effective innovative initiatives were often taken up as national policy and implemented across the country. Also, the All China Federation of Trade Unions played an important role in the Strong political will extension of pension coverage.

Extending old age pensions to all was Fiscal support driven by a strong commitment to reduce poverty and inequality, and All three schemes benefit from public to sustain economic development. subsidies. With regards to the residents’ Taking the rural pension as a concrete pension, a large proportion of its total example, the 16th and 17th National pension expenditures is supported by Congress of the Communist Party government contributions. Revenue called for the development of an old- sources for the residents’ pension in age pension for the rural population 2013 are as follows: in 2002 and 2006, respectively. In 2009 the Government issued a Figure 3. Revenue sources for the residents’ practical Guidance and launched the pension in 2013 rural pension with the aim to cover the entire rural population by 2020. It merged with the urban residents’ pension in 2014 to form the residents’ pension scheme. The other pension systems benefited from similar political support.

Source: ASB 2013

55 China: Universal Pensions

3. What are the main Impact on the economy developmental results and impact on people’s lives? The increases in both the pension coverage and benefit levels have To build a harmonious society is one enhanced the purchasing power of of the core objectives of the Chinese people in old age. Since pensioners government. The 12th Five Year represent a large and growing Plan launched in 2011 also aimed at component of Chinese society, domestic increasing aggregate demand by a consumption and markets targeting number of measures such as more older persons - such as customised foods, public spending on social protection clothing, health, medicine, care, and and public services, higher minimum tourism - have rapidly developed and wages and reducing the savings rate expanded, forming new opportunities of households. for domestic economic development (China Consumers’ Association, 2013). Impact on people’s lives Additionally, household precautionary savings are expected to reduce due By the end of 2013, about 80 per to income security and health care, cent of the population in working supporting demand and thus economic age and above, regardless of their growth. employment and contribution histories, were covered under the 4. What’s next? pension system (MOHRSS, 2013). Civil servants have long enjoyed The Government is continuing the relatively high benefit levels. The expansion of pensions and further benefits paid under the workers’ improving the system’s adequacy, pension have steadily increased at an sustainably, and equity. annual rate of 10 per cent over the last eleven years, generally ensuring Benefit adequacy a decent life for these pensioners (Wen, 2014). Although the residents’ In particular, there are concerns pension benefit level is still far from about the low level of benefits paid adequate, it undoubtedly helps many to 130.7 million pensioners under the older people who live in vulnerable residents’ pension. On average, the conditions and this is particularly the benefits paid represent less than 11 case for older women in agricultural per cent of average income per capita settings.1 in rural areas in 2012 (National Bureau of Statistics of People’s Republic of ¹ Lei, Shu (2015) A small amount can make a big dif- China (NBOS), 2013; MOHRSS, 2012), ference: The effect of the New Rural Social Pension Insurance program on the retirement decision in much lower than the minimum China. Netspar

56 China: Universal Pensions

standard set in the Social Security Figure 4. Overview of different benefit levels (Minimum Standards) Convention, by type of pensions 1952 (No. 102).

Sustainability

China’s economic growth, measured at around 10 per cent annually for three decades, has slowed recently to just over 7 per cent. At the same time, the aging of China’s population is accelerating as a consequence of the baby-boom in 1950s and 1960s, Source:Based on ILO estimates and MOHRSS, 2001- the implementation of the one-child 2013 policy, and constant improvements in life expectancy. Though China has significant fiscal space for social Overall, the phenomenal progress in protection, it is contemplating and expanding pension coverage is being developing policy measures to ensure continued, fast-tracking universal the long-term economic sustainability pension coverage by 2020, in line of the pension system, such as with the Social Protection Floors increasing the pensionable age. Recommendation, 2012 (No. 202).

Equity

Benefit level disparities exist among and within the three schemes. As illustrated in the figure below, the ratio of average benefits in 2013 was estimated as 100:51:2 for civil servants’ pension, workers’ pension, and residents’ pension, respectively. Within the workers’ pension scheme, This Universal Social Protection brief was there are regional disparities in produced by Aidi Hu of the ILO. It was the pension replacement rates. reviewed by Charles Knox-Vydmanov of For instance, in 2012 the average HelpAge, Isabel Ortiz, Valérie Schmitt and replacement rate was 70.5 per cent in Jurriaan Linsen of the ILO. Shandong, but only 43.2 per cent in Chongqing (Zheng, 2013).

57 China: Universal Pensions

Ministry of Human Resources and Social References Security of the P.R.C. 2001-13.人力资源和社会保障事业发展统计公 [Annual Statistical Central Committee of the Communist Party of Bulletins on Human Resources and Social China (CPC). 2006. 中共中央关于构建社会主 Security Development] (Beijing). 义和谐社会若干重大问题的决定 [Resolution on a number of important issues for building National Bureau of Statistics of People’s up a socialist harmonious society] (Beijing). Republic of the P.R.C. 2013-14. 中国统计年鉴 [China Statistical Yearbook] (Beijing). China Consumers’ Association. 2013. 2013年中国老年消费者权益保护调查报告 [Survey State Council. 2009. 国务院关于开展新型农 report on the protection of old-age consumers’ 村社会养老保险试点的指导意见 [Guidance rights and interest in 2013] (Beijing). on piloting and setting up a new rural social insurance pension system] (Beijing). ILO. 2014. World Social Protection Report 2014-15: Building economic recovery, Wen, R. 2015. “中国连续十年提高企退人 inclusive development and social justice 员养老金翻1.7倍人均近2千” [Workers’ (Geneva). Available at: http://www.social- pension has increased consecutively over protection.org/gimi/gess/ShowTheme. the past 10 years, reaching nearly 2000 CNY action?th.themeId=10. per retiree per month on average, about 1.7 times higher than its level in 2004], in New —. 2012. Recommendation concerning Beijing Daily (Beijing), 9 Jan. National Floors of Social Protection, Report 14A, International Labour Conference, 101st Zheng, B. 2013. “养老金待遇省际差距日益 Session, Geneva, 2012 (Geneva). Available 凸显替代率最高相差 27%” [The disparity in at: http://www.ilo.org/dyn/normlex/en/f?p pension replacement rate among regions is =NORMLEXPUB:12100:0::NO::P12100_ILO_ growing with as high as 27 percentage points’ CODE:R202. difference], in Shebao Wang [China Social Security Net] (Beijing), 26 Sep. —. 1952. Convention concerning Minimum Standards of Social Security, International Labour Conference, 35th Session, Geneva, 1952 (Geneva). Available at: http://www.ilo. org/dyn/normlex/en/f?p=NORMLEXPUB:121 00:0::NO::P12100_ILO_CODE:C102.

Jiang, Z. 2002. “党的十六大报告” [The Report of the 15th Central Committee of the CPC], address by Jiang Zemin delivered at its 16th National Congress (Beijing).

58 Main lessons learned

Georgia • Since its inception, the universal old age pension has had a strong Universal old-age pensions impact on reducing poverty rates among the elderly and is likely to remain a powerful mechanism for old age poverty prevention going forward. In 2006, the Georgian Parliament introduced the Law on State Pensions • Ensuring pension coverage (2005); the law resulted in the to all elderly is possible even elimination of the contributory pension in the context of high labor system and the implementation of market informality and limited a flat-rate basic pension which had fiscal space, however, projected three1 components, namely old age, ageing of the population may disability, and survivor pension. The require subsequent design most notable characteristic of the law adjustments to the universal was the universal nature of the old social pension to preserve its age pension. The establishment of the fiscal and social sustainability for universal, non-contributory flat-rate future generations. pension was primarily driven by the need to reduce Georgia’s substantial Coverage poverty rates. Provided the liberal eligibility criteria, 1. What does the pension the universal pension system provides system look like? virtually complete coverage of the elderly population. In 2015, 95 percent Overall structure of the population above age 60 was in Figure 1. Persons receiving pension package The old age pension scheme in (old age), thousands Georgia is a noncontributory pension scheme which provides a flat rate benefit to all elderly. The only eligibility condition is age – currently set to 65 and 60 for men and women respectively.

¹ Under reforms implemented in 2012, disability and survivor pensions have been separated into differ- Source: Georgia National Statistics Office ent social assistance programs.

59 Georgia: Universal old-age pensions

receipt of a universal pension, making Table 1. Old Age Pension Amounts and it the largest redistributive social Replacement Rates protection program in the country in 2012 2013 2014 terms of both coverage and spending. Average salary of 713 773 818 employees (GEL) Benefits Subsistence minimum of average 132 137 141 The universal old age pension program consumer (GEL) provides a flat rate benefit to all Old age pension 110 150 150 citizens above retirement age. The (GEL) benefit amount has no relation to employment or wages earned during Old age pension including 120.9 - - the active life. In 2015, the flat-rate long-service benefit amounted to 160 GEL (about bonus (GEL) 67$). The primary objective of the Replacement rate³ in relation system is to prevent poverty in old to old age pen- 15.4 19.4 18.3 age. The current replacement rate sion (percent- is a modest 18% of average wage. age) The total cost of the pension system Old age pension (including survivor and disability as a percent of 19.3 25.3 23.0 assistance) amounted 5.2% of GDP GDP per capita and 16.2% of government revenues in 2015. Between 2005 and 2015, the Replacement rate in relation flat-rate pension has been increased to old age pen- more than ten-fold2. Government sion including 17.0 - - long-service projections show that demographic bonus (percent- aging, among other factors, will result age) in increased pension spending over Source: Reform of the Universal Pension Benefit and the coming decades. Introduction of a Supplementary Pension Scheme, The social pension, being a flat-rate March 2016, Ministry of Economy and Sustainable benefit, provides higher income Development of Georgia; Staff Calculations replacement for lower income groups. For those retiring at the end of 2014 average wage and further drops to as while earning 50% of the average wage low as 10% for a person earning twice the universal old-age pension provided a the average wage. Thus, the universal replacement rate of approximately 37%. pension is a means of redistributing The level of replacement rate declines income from wealthier segments of to 18% for someone retiring at the society (who pay greater nominal

² The old age pension is adjusted, typically annual- ³ Replacement rate is the relevant pensionamount ly, on an ad-hoc basis. expressed as a percentage of the average salary.

60 Georgia: Universal old-age pensions amount of tax) to the more vulnerable Figure 2. Social Expenditures for All segments of society in old age. Categories of Pensions (2006-2015)

Financing

The universal pension system in Georgia relies on general revenues. Although the current financing mechanism has considerable advantages – such as eliminating the need to record and collect pension contributions and calculate pensions based on individual wage histories – the financing mechanism is not immune to the risks posed by Source: Reform of the Universal Pension Benefit and Introduction of a Supplementary Pension Scheme, demographic ageing. Georgia is facing March 2016, Ministry of Economy and Sustainable an ageing population, characterized Development of Georgia by declining birth rates and longer life expectancy. In addition, the country 2. How was this major has also experienced outmigration, breakthrough achieved? further worsening the demographic outlook. Policy makers will have to The collapse of the centrally planned ensure adequate pensions levels are economic system in Georgia in the preserved for all elderly Georgians in early 1990s was devastating for public face of a swelling elderly population pension system finances. Prior to and a shirking tax base. the demise of the Soviet Union, the pension system provided differentiated Legal aspects and institutional pensions financed on a pay-as-you- arrangements for delivery go basis. Old age pension eligibility criteria included a minimum of 20 and The governing legislation for the 25 years of service for women and universal old age pension is the Law menrespectively. During the soviet era on State Pensions (No. 2442 of 23 of near full formal employment rates, December 2005). The responsibility for the pension system achieved nearly allocating the state pension is under universal coverage level, providing the Georgia Social Services Agency, pensions between 60% and 100% of which is located under the Ministry of average wage in the late 1980s. Labor, Health and Social Affairs. Shortly after the transition, increases in unemployment and informal sector work led to a shrinking contribution

61 Georgia: Universal old-age pensions base and a decline in available pensions. Until 2004 state pensions resources for pension expenditures. were financed by the State United On the benefit side, demographic Social Insurance Fund (SUSIF) based ageing and early retirement – often on social contributions from employers used a method to cope with high rates and employees; from 2004 social of unemployment among the older programs became financed from population – resulted in an increase in the general budget revenues. Since the number of pensioners. As a result, SUSIF lost one of its key functions - the existing financing mechanism administering and collecting individual for the pension system was no social contributions - the structure was longer viable. Shrinking contribution reorganized into two new structures: i) revenues and swelling pension State Agency of Employment and Social expenditures prompted policy makers Assistance and ii) Health and Social to explore alternative measures for old Programs Agency: by the end of 2010 age income provision. these were merged to become the Social Service Agency (SSA). Figure 3. Overview of events marking the extension of pension coverage since 1991 3. What are the main developmental results and Demise of the Soviet Union in 1991 resulted impact on people’s lives? in extremely difficult economic and social conditions in the country. The universal old age pension in Georgia serves as an important poverty Dramatic hyperinflation and currency depreciation (1993-1994) had a strong prevention mechanism among the negative impact on pension adequacy. elderly. Poverty analysis conducted by the World Bank shows that an old age 1996: the Soviet system of differentiated pensions based on occupation had been pension of 100 GEL reduced poverty replaced it with a flat-rate pension system. rates by 15 percentage points across the country. The impact of the old age 1996: eligibility for pensions was still limited pension is even more pronounced in to those who had previously contributed to the system. rural areas. World Bank estimates from 2010 suggested that a 20 GEL pension 2006: Passage of the Law of Georgia on State increase in 2010 from 80 to 100 GEL Pension (2005) eliminated existing pension caused poverty rates to decline by system and introduced non-contributory flat- rate basic pension. The old-age pension became 2.8%. The flat-rate pension has the universal for all elderly citizens. highest impact on poverty rates among older cohorts of pensioners. The social Reforms starting in 2004 ushered in pension reduced poverty rates from major changes regarding the financing 37% to 10% among the age group of of state social programs, including 75-85 according to a UNICEF study. The

62 Georgia: Universal old-age pensions universal old age pension is likely to remain a powerful mechanism for old References age poverty prevention going forward. UNICEF and University of York (2014) The Table 2. Poverty Rate in Georgia with and Well-Being of Children and their Families in without Old-age Pensions (in percent of Georgia: Georgia Welfare Monitoring Survey overall population) Third Stage. UNICEF Georgia

With GEL Without GEL 100 pension 100 pension Georgian Pension Reform: Reform of the benefit benefit Universal Pension Benefit and Introduction of Overall a Supplementary Pension Scheme. Pension poverty 22.9 38.1 headcount Reform Unit, Ministry of Economy and Sustainable Development of Georgia. Urban 17.7 29.5 Rural 28.2 46.9 Schwarz, Anita M., Omar S. Arias. 2014. The Inverting Pyramid: Pension Systems Facing Source: Reform of the Universal Pension Benefit and Demographic Challenges in Europe and Introduction of a Supplementary Pension Scheme, March 2016, Ministry of Economy and Sustainable Central Asia. Development of Georgia

4. What’s next?

The universal old age pension is adjusted on ad-hoc basis which could expose retirees to the risks of benefit erosion overtime. Policy makers are currently reviewing reform options which include the potential introduction of an automatic indexation mechanism which would preserve or improve the purchasing power of the universal old age pension.

This Universal Social Protection brief was produced by Miglena Abels of the World Bank. It was reviewed by Isabel Ortiz and Loveleen De of the ILO; and by Robert Palacios of the World Bank.

63 Kosovo Main lessons learned • In the context of challenging Universal old-age pensions economic and social conditions, Kosovo opted for a basic old age pension in an effort to address high poverty rates among the elderly. The decision to implement Old-age pension scheme a universal pension also proved affordable given the small share During 2001-2003 period, Kosovo of elderly in total population. implemented an entirely new pension Kosovo’s young demographics system comprised of three “pillars”. permitted all elderly to be Pillar I includes a basic old age pension provided with a pension at fiscally (paid to all Kosovars, 65 years of age manageable cost. and older) and a disability pension. Both pensions are financed from • Even though the basic old age general revenues rather than an pension has effectively reached all elderly Kosovars and played a earmarked wage tax. The objective significant role in bringing down of the benefit is to prevent old age poverty rates, the level of the poverty by ensuring all elderly have benefit remains quite low relative access to a pension. The disability to GDP per capita. Therefore, pension is narrowly focused on alternative mechanisms for old total and permanent disability, age income provision and savings ensuring that scarce resources are would need to be improved well focused on the truly disabled. and developed to allow for Pillar II of the system is a mandatory, higher income replacement in defined-contribution, savings pension retirement. program whereas Pillar III provides for supplemental, individual or employer- • The basic old age pension has promoted poverty avoidance sponsored pension schemes. among the elderly without the imposition of high payroll taxes 1. What does the pension on working-age individuals - system look like? since there are no wage-based contributions. Overall structure • Having access to an old age The old age pension scheme in Kosovo1 – pension haslikely played a part in reducing social exclusion rates ¹ Throughout this brief, references to Kosovo should among the elderly. be taken to be within the meaning of the UN Securi- tyCouncil Resolution 1244, adopted on 10 June 1999.

64 Kosovo: Universal old-age pensions

introduced in 2002 – is a Table 1. Pension landscape in Kosovo2 noncontributory, general revenue financed pension scheme which Type of Benefit Age Target group provides a flat-rate benefit to all Pension Amount Basic 65 All Kosovars 65 years of age and older. Flat (75) pension

Beneficiaries Educa- Coverage Contrib- based on law tion-linked utory 65 from before (158- pension The basic old age pension achieves 1999* 240)** almost full pension coverage in an Disability 100 % disa- environment where only a small <65 Flat (75) pension bled share of the population earns formal Work wage income, in contrast to the old Work accident or disability <65 Flat (75) Yugoslav system that reached only professional pension about half of Kosovo’s elderly. The disease number of basic old age pension recipients in 2014 was 125,800 while Family Beneficiaries pension based on law Flat (75 according to the 2011 Census, the Spouse from before +20% per population over the age of 65 was <65 1999* or fam- eligible (Spouse, ily of work child) 116,785. children or disabled parents) Involuntary Benefits Trepca ear- unemployed 50-64 Flat (105) ly pension > 50% disa- All Kosovars above age 65 are eligible bled Phased for the basic old age pension. Disability Kosovo withdrawal Pension pensions are available to fully disabled 65 All (at least Savings 150) or resident citizens aged between 18 Trusts and 65. The scheme is financed from annuity the budget and is operated by the Ministry of Labor and Social Welfare The pension landscape in Kosovo has (MLSW), with no benefits available rapidly expanded since the 2001- for partially disabled individuals – i.e. 2003 reforms and at present includes individuals with a disability level below numerous programs, covering both 100 percent. The uniform monthly elderly and working age people. benefit is EUR 75, equal to the basic ² *Effectively this corresponds to a minimum eligible pension and about 23 percent of GDP career before 1999 of 15 years. The benefit range per capita. for education is not yet determined – the numbers indicate the targeted range as indicated by the authorities.** The benefit range for education is not yet determined – the numbers indicate the targeted range as indicated by the authorities. ***For newly recognized cases after 1999 – unspecified for others

65 Kosovo: Universal old-age pensions

Table 1 outlines the various pension Figure 1. Pension Expenditures as a schemes which range from funded percentage of GDP, 2010-2015 defined contribution pensions (KPST) to universal, flat, non-contributory provisions. The basic pension remains a general-revenue financed universal flat benefit, covering all citizens aged 65 and over. The contributory pension is a budget-financed defined benefit scheme for citizens above age 65 with a sufficiently long work experience prior to 1999. Eligibility requires at Source: Kosovo Ministry of Labor and Social Welfare least 15 years of contributions prior to 1999 into the social security scheme Legal aspects and institutional of Yugoslavia. Basic and contributory arrangements for delivery pension cannot be paid to the same person. Eligible individuals were, until United Nations Interim Administration 2015, entitled to a flat benefit of EUR Mission in Kosovo (UNMIK) Regulation 140, with the same residence and 2001/35 of Pensions in Kosovo was the administrative procedures in place as first act to regulate pension policy in for the basic pension. Kosovo after 1999. It established the legislative foundation for Pillars II and Financing III. Regulation 2002/15 provided the legislative foundation for Pillar I. The The basic old-age pension is funded Pension Administration Department from general government revenues, at the Ministry of Labor and Social on a pay-as-you-go basis, with Welfare (MLSW) is responsible for universal eligibility upon reaching managing and administration of the age 65 regardless of other income pension scheme set by applicable sources. The cost of the basic old age legislation. Pensions are paid through pension amounted to 2.1% of GDP in the banking system. 2015.

2. How was this major breakthrough achieved?

Before 1990, the employed population in Kosovo was insured by the Pension System of the former Yugoslavia. The pension amount was determined

66 Kosovo: Universal old-age pensions according to years of contributions contributions; plus approximately and earnings. The decision to opt 25,000 over 65 who were receiving for a new, universal, flat benefit was survivor and disability pensions); 2) based on the following key factors: The elderly who did not contribute to (or were excluded from) the past 1. A desire to avoid high contribution system (roughly 90,000, or up to rates and to promote long-term five percent of the population, who fiscal sustainability. may be equally in need of a pension as those who contributed); and 3) 2. The low rate of coverage provided the current working-age (up to 1.4 by the old system. million individuals 16-65, who were not making contributions to any 3. The poor state of contribution pension system and were not earning records for the old system. entitlements to any future pensions). Since 2008, a parallel pension 4. Political challenges in determining system providing top-up pensions to how to equitably treat those who pensioners who paid contributions to were forced out of their jobs the pensions system of the republic and denied the opportunity to of Serbia before the conflict has been participate in the pension program implemented. in the decade following the political The system preceding the current changes of 1989. old age basic pension scheme was ineffective on several fronts. The old The new basic pension was designed system was a typical East European so that it does not discriminate based system with very high contribution on work history or ethnicity. The rates, frequent delays in payment rationale behind the implementation of pensions, a high level of evasion, of the basic pension scheme was to early retirement ages, and special create a pension system that covers categories of earlier retirement, a the whole population; the Yugoslav complicated benefit formula, and pension system covered only about increasing financial unsustainability. half of the elderly in 1998. Although the Kosovar population is The basic pension scheme was young, it will start to age rapidly and designed to address the needs of therefore will be subject to the same all population groups, including: 1) demographic pressures that confront the elderly who contributed to the the Yugoslav system. Therefore, it was past system (up to 25,000 old-age decided that a clean start should be pensioners, or less than 1.5% of the made with a new, modern pension population, who felt they are entitled system. to benefits based on these past

67 Kosovo: Universal old-age pensions

3. What are the main 4. What’s next? developmental results and impact on people’s lives? Although the law defines the indexation of the basic pension level in The basic old age pension protects line with yearly cost of living increases, almost all elderly Kosovars against old this has not always not been observed. age poverty at a relatively low cost. In fact, pension increases have typically The basic old age pension is 75 EUR occurred on an ad-hoc basis. per month which equals about 23% of There has been a conversation around GDP per capita. Although the level of limiting the eligibility for basic old the benefit may not appear sufficiently age pension to resident citizens and adequate, it is important to remember introducing strict residency controls. that the primary objective of the basic This measure could be an effective old age pension is old-age poverty component of reforms aimed at prevention. The mandatory defined boosting the adequacy of the basic old contribution pension scheme (KPST) age pension while also controlling its provides a mechanism for additional fiscal costs. savings for those who wish to replace a higher percentage of their income This Universal Social Protection brief earned during their active years. was produced by Miglena Abels of World The structure of the basic old age Bank. It was reviewed by Isabel Ortiz, pension system was formed with the Kenichi Hirose and Loveleen De of the vision to create a pension system ILO. which would also promote economic development. The basic pension scheme was structured in a way, to the extent possible, that would References facilitate savings and investment of the population, rather than relying State Portal for the Republic of Kosovo, on mechanisms that are similar Available at: https://www.rks-gov.net/en-US/ to issuance of government debt. Qytetaret/BeneficionetAsistenca/Pages/ Furthermore, the pension system was Pensioni.aspx intended to promote development of the labor market, suggesting that Regulation no. 2002/15 on the promulgation of contribution rates be set at reasonable a law adopted by the assembly of Kosovo on the levels and that pension programs methodology for setting the level of basic pension offer participants acceptable returns in Kosovo, and determining the commencement on their contributions so that there date for provision of basic pensions. are incentives to participate. Available at: http://www.unmikonline.org/ regulations/2002/RE2002_15.pdf

68 Kosovo: Universal old-age pensions

Loxha, A. 2012, Pension System in Kosovo: A policy report by the group for legal and political studies No 06, December 2012 ― review of current state, main challenges and gaps. Available at: http://legalpoliticalstudies. org/download/Policy%20Report%2006%20 2012%20eng.pdf

2014 Kosovo Social Welfare Statistics. Available at: https://ask.rks-gov.net/en/swl

69 Main lessons learned

Lesotho • The high prevalence of HIV/AIDS in Lesotho often leads older persons Universal pensions to become the main caregivers for their orphaned grandchildren. In such cases, the Old Age Pension also benefits children.

The Old Age Pension (OAP) is a tax- • Lesotho’s implementation of based scheme for all older persons. the Old Age Pension shows that This non-contributory social pension high coverage is possible even in also benefits other household mem- difficult geographic conditions. bers, particularly children. With around 4 per cent of its popula- • The OAP has always been fully tion above the age of 70, Lesotho has funded and administered by a larger share of older people than the Government, which is proof many countries in sub-Saharan Africa. that even a country with limited All citizens of Lesotho over 70 years of financial resources can afford a age, with the exception of retired civil universal programme. servants and war veterans, are enti- • Regular adjustments in benefit tled to a monthly pension benefit of amounts indicate the continued 550 Lesotho Maloti (LSL), equivalent commitment from the Govern- to US$40. The OAP was introduced to ment. lift older persons out of poverty and is the largest regular cash transfer • Lesotho’s OAP experience shows in Lesotho, covering 83,000 persons that a universal social protection (around 4 per cent of the population). scheme which has high coverage While coverage of eligible persons is can help garner political support universal, it is estimated that many among people and can be a key more benefit indirectly. factor in the re-election of a Prior to the OAP’s introduction, only government. war veterans and civil servants received a pension, covering less than 3 attributed to the fact that Lesotho per cent of older persons in Lesotho. like the rest of Southern Africa is further ahead in the demographic 1. Why is the OAP needed? transition process, as well as to outmigration of young people and Lesotho’s share of elderly people decreased longevity due to HIV/AIDS. is larger than in other sub-Saharan Life expectancy is only 48 years and African countries. This can be an estimated 360,000 children have

70 Lesotho: Universal pensions lost either one or both parents to the HIV epidemic. Often, older Basotho become the primary caretakers of their grandchildren. In rural areas, 8 per cent of households are skip- generation households. Furthermore, the incidence of poverty is high with 56.2 per cent of At the outset of the OAP, in 2004, 1.9 million Basotho living on less than a village-by-village registration $1.25 a day. Households with people and sensitization of communities above 59 years of age experience was carried out by the District higher food poverty than the general Administration, traditional village population (39.3 per cent compared chiefs, and Members of Parliament. to 34.2 per cent). Following this initial registration Against this backdrop, the process, new applicants now have to Government of Lesotho introduced submit completed application forms the OAP in 2004 to provide a basic at local government offices. income guarantee for older persons with the ultimate objective of lifting Registration and payment process them out of poverty. Thereby, Lesotho has provided universal benefits for Application forms are available at older citizens in sub-Saharan Africa. local government offices. Applicants From the beginning, the OAP has must provide official proof of identity been an entirely national effort. The (national identity card, passport, or main drivers behind the OAP are voter card). If the beneficiary is unable the political will and commitment to provide such a proof or a birth of the Government. The OAP played certificate, a letter from the village a significant role in the election chief attesting their age is accepted. outcome in 2007. In post-election This and the fact that the applications surveys, voters indicated that the are not cross-checked with the Home introduction of the old-age pension Affairs database to leave out non- was a strong motivation to vote for eligible pensioners (including retired the then governing party. civil servants) leads to the possibility of fraud and the creation of “ghost 2. How is the OAP implemented? beneficiaries”.

Upon registration, pensioners receive a monthly payment of LSL550 ($40). The amount is announced in the annual budget by the Ministry of Finance.

71 Lesotho: Universal pensions

Figure 1. Overview of the OAP institutional On a few occasions, remote payment set-up points were served by helicopter because of weak road infrastructure. The national army provides security at service points and while transferring the money. Due to the manual nature of the entire process from registration to payment, there have been concerns over safety and opportunities for fraud. The operating costs also remain high necessitating a reform of the system towards process automation. Random checks of payment points are conducted on a regular basis to ensure beneficiary satisfaction with service Applications are then sent to the delivery. Due to the mostly manual Registration Section in the Pensions nature of the OAP management Directorate in the Ministry of Finance. information system and the absence The Registration Section approves the of checks on whether the beneficiaries applications and enters the details of are still alive, a sizable number of ghost successful applicants into the payroll beneficiaries claim the OAP benefit on a monthly basis. The process through proxies who collect the money of registration is paper-based and on their behalf. centrally-managed. Reconciliation of payments is done The Pensions Unit in the same manually against the payroll. Because Directorate transfers funds to around this process is cumbersome there are 300 payment points across the some doubts as to whether it takes country on a monthly basis. These place systematically at the end of funds are physically carried by the each month. armed forces to the payment points. Successful applicants are paid monthly Financing at their preferred payment point by pension officers from Maseru. They The OAP is financed by general taxation, are identified and verified using their which largely comes from revenues of identity card. They then confirm the Southern African Customs Union. receiving the payment with their The total cost is estimated at about 2.5 signature or thumbprint. Payment per cent of GDP. points are located throughout the Although OAP utilizes existing country while in rural areas, mobile structures and government actors, the pay points are employed. administrative costs are estimated to be

72 Lesotho: Universal pensions quite high at around 20 per cent.1

Other services and transfers

Provided as part of the national social protection system, they include subsidized or free primary health care at government health centres and government hospitals, free anti- education-related costs, such as school retroviral treatment medication uniforms, shoes, and books (Thulo for HIV/AIDS patients, as well as and Croome, 2006). Beneficiaries are the “Public Assistance” cash grant also able to make purchases on credit administered by local governments from local merchants using future OAP for those deemed needy, which payments as guarantees. includes OAP beneficiaries too. Finally, the OAP has contributed to empowering older persons by 3. What is the OAP’s impact on improving their financial status in the people? household and giving them a feeling of dignity (Wahenga, 2007). Though rigorous and recent impact evaluations of the OAP are hard to 4. What’s next? find, it is observed that the OAP not only benefits older persons, but also Lesotho has made considerable progress their grandchildren in numerous in building its national SPF. However, skip-generation households. Studies there is room for improvement. estimate that beneficiaries spend as much as 20 per cent of the benefit • Keeping in mind the financial cost amount on dependent and orphaned and administrative aspects of the children. OAP, lowering of the eligibility age A large portion of the pension is spent is also needed to ensure that it on food, which has had a positive benefits all older people. effect on food security. The number of beneficiaries who say they rarely or • Coordination between implementing never had enough food declined from agencies could be improved, such 20 per cent to 10 per cent after the as between the Ministry of Social introduction of the OAP. Development and the Pensions Beneficiaries also reported spending Directorate. Improved coordination on heating material, clothes, and could also facilitate case management and referral of OAP beneficiaries to ¹ This excludes the cost of the services provided by the Armed Forces. other government services.

73 Lesotho: Universal pensions

• The OAP system could benefit from Giovannetti, G. 2011.Social protection for a modernization and automation inclusive development. A new perspective in process to improve its effectiveness EU cooperation with Africa, Robert Schuman and efficiency. This is a current presentation, Nairobi, 10 March. priority in the country. In future, all OAP beneficiaries could be included Government of Lesotho. 2014. National Policy in the National Information System on Social Development (Maseru). for Social Assistance (NISSA) to improve the application, verification —. 2014. National Social Protection Strategy and payment processes. (Maseru).

Monchuk, V. 2013. Reducing poverty and This Universal Social Protection brief was investing in people: The new role of safety nets in produced by Thea Westphal of the ILO. Africa (Washington, DC, World Bank). It was reviewed by Lucilla Maria Bruni and Ana Ocampo of the World Bank, Olivier, M.; Andrianarison, F.; McLaughlin, and Isabel Ortiz, Valérie Schmitt, Betina M. 2013. Study on social protection in Ramirez-Lopez, James Canonge and sub-Saharan Africa, Report (European Loveleen De of the ILO. Commission). Oxford Poverty and Human Development Initiative. 2015. Lesotho Country Briefing (Oxford, University of Oxford). Available at: References www.ophi.org.uk/multidimensional-poverty- index/mpi-country-briefings/. Beales, S. 2007. How older people spend their pensions – Universal benefits: Delivering Pelham, L. 2007. The politics behind the rights and reducing poverty, PowerPoint non-contributory old age social pensions in presentation, Feb. 2 (Help Age International). Lesotho, Namibia and South Africa, CPRC Working Paper 83 (Chronic Poverty Research Bureau of Statistics (Lesotho). 2013. Lesotho Centre). Demographic Survey, 2011 (Maseru). Smith, W.J.; Mistiaen, E.; Guven, M.; —. 2008. 2008 Integrated Labor Force Survey Morojele, M. 2013. “A safety net to end (Maseru). extreme poverty”, Africa Social Safety Net and Social Protection Assessment Series, Cohen, B.; Menken, J. (eds.). 2006. Aging in Social Protection And Labor Discussion Paper sub-Saharan Africa: Recommendations for No. 1409 (Washington, DC, World Bank). furthering research (Washington, DC, The National Academies Press).

74 Lesotho: Universal pensions

Thulo, T.; Croome, D. 2006. Furthering national action to realise commitments to social transfers in Africa, paper presentation, Lisbon, 4 Oct.

Wahenga. 2007. Old Age Pension, Lesotho, Reba Case Study Brief Number 3 (Johannesburg, Regional Hunger and Vulnerability Program).

World Bank. 2014. Lesotho: Systematic country diagnostic (Washington, DC).

World Food Programme. 2015. Lesotho: Current issues and what the World Food Programme is doing. Available at: https:// www.wfp.org/countries/Lesotho.

75 Main lessons learned

Maldives • A universal non-contributory Universal old-age pensions pension can be a good policy instrument to address poverty and income inequality.

• However, there will be continuing Maldives has witnessed a dramatic political pressure to increase the reform in its pension system. universal pension benefit level While a new two-pillar system was beyond the optimal value. successfully established, the reform has been incomplete due to revival of defined benefit pension schemes for schemes that were operating then government employees and irrational solely for government employees and benefit level of non-contributory also was extended to the entire formal universal pension. sector labor force. In the second phase, it has been opened to self-employed 1. What does the system workers who can subscribe to MRPS look like? on voluntary basis and are encouraged to do so with some co-contribution Structure of the overall system incentive provided by the government. Nine government institutions have Maldives’ pension system has also set up institution-specific pension witnessed tremendous reform schemes for their employees following since 2008. The Maldives Pension defined benefit model in addition Act (2009) establishes a two-pillar to MRPS. In 2014, the President pension system, including a new introduced Senior Citizen Allowance contributory pension scheme based (SCA) to all Maldivians aged 65 and on a defined contribution (DC) model above on top of OABP. with centralized recordkeeping and a non-contributory citizen’s pension Coverage (also called Demogrant) aimed at providing an income floor for all As of April 2016, there are 16,401 Maldivians aged 65 and above. Maldivians receiving OABP benefits The first scheme is called Maldives and 16,884 receiving SCA benefits.1 Retirement Pension Scheme (MRPS) ¹ There are a small number of SCA recipients who and the second scheme is called do not receive OABP benefit. According to the Mal- Old Age Basic Pension (OABP). The dives Pension Act, OABP benefit is to be reduced if the same beneficiary also receive other pension MRPS first replaced the two pension benefits.

76 Maldives: Universal old-age pensions

The coverage is regarded as universal.2 Maldivian senior should receive government benefit MVR 5,000 Figure 1. OABP recipients (about US$ 325) in total. The OABP benefit was MVR 2,000 initially and was adjusted upward in 2012 to compensate inflation.

Financing

According to the Maldives Pension Act, employee and employer both contribute 7% of employee’s pensionable wage to his or her Retirement Saving Account in MRPS. Employees can contribute Benefits more voluntarily. OABP, SCA and the institution-specific pension are all The monthly pension benefit under financed from the general budget and OABP is MVR 2,300 while the SCA in 2015 they account for about 2.6% benefit is such that every eligible GDP.

Figure 2. Social Pension as % of GDP per capita

² According to the most recent Maldives Population & Housing Census 2014, there are 16337 Maldivians who are aged 65 or above.

77 Maldives: Universal old-age pensions

Legal aspects 2. How was this achieved?

The Government of Maldives initiated The following timeline summarizes the the policy deliberation upon the sequence of main events associated reform of its pension system in late with Maldives’ universal old age 2006 and the reform proposal was pension: enacted in the Maldives Pension Act in 2009. The SCA was introduced Figure 3. Timeline of events associated with under a President decree. Maldive’s universal old age pension

Institutional arrangements

Both MRPS and OABP are managed by the Maldives Pension Administration Office (MPAO). MPAO is established under the Maldives Pension Act and operates autonomously under the management of a CEO and a Board of Directors, both appointed by the President. MPAO is mandated to carry out the following tasks: Political economy, stakeholders involved in the process, what was • Administer MRPS. the main driving force behind the • Pay benefits under OABP, SCA, policy change? and institution-specific retirement schemes. Maldives started a complex political • Manage MRPS pension funds. transition to a multi-party democracy • Establish standards, rules and with a new constitution in 2008. A guidelines related to the schemes. wide range of reforms were initiated • Create public awareness and to modernize its governance structure educate scheme participants. and to increase and improve service delivery in response to rapid rising For OABP, SCA, and institution-specific demands by citizens. One focus area retirement schemes, the MPAO will was to build a comprehensive and receive fund transfers from the Ministry effective social protection system to of Finance monthly to pay out those provide resilience and protect the benefits. poor. Two major deficiencies identified then were limited old age security and inadequate protection provided

78 Maldives: Universal old-age pensions by the existing social safety net programs against poverty. The old pension system only covered public sector employees and had several design flaws that could result in sub- optimal retirement income. And the old social safety net programs also had extremely low coverage and did not appear pro-poor due to large inclusion and exclusion errors. Only Overcoming constraints 0.3 percent of the population and 1.6 percent of the poor were covered The MPAO has made great efforts in by recurrent transfers; and total raising awareness among potential safety net spending (outside of the beneficiaries about OABP and tsunami benefit) was 0.2 percent of MRPS through various channels and GDP in 2004, much lower than what partnerships. It has also worked with other countries with a similar level of the banking industry to ensure regular income spent. and reliable cash disbursement in The pension reform plan, initiated remote islands. by the previous government but received full support of the new 3. What are the main results in government after 2008, was later terms of impact on people’s lives? codified in the Pension Act in June 2009. The new pension system As both universal old age pension separates the redistributive and benefits were implemented after the savings functions in OABP and MRPS most recent survey data (2008/09), respectively. Furthermore, it is also little quantitative evidence is available envisioned that while the real value on the effects of these pension of OABP benefit is to remain constant payments to the recipients and their over time due to indexation against families. The upcoming Household inflation, continued wage growth Income and Expenditure Survey (2016) would result in a higher contributory is expected to be the first opportunity pension over time. Hence in the long to assess to what extent these benefits run, most Maldivians would rely on have reduced poverty within elderly as the MRPS. well as the population as a whole.

79 Maldives: Universal old-age pensions

4. Key indicators

Both universal old age pension programs are supposed to cover all elderly who are 65 or above. Furthermore, the total benefit level of MVR 5,000 is rather high relative to Maldives per capita income (around MVR 9000 in 2014) and was estimated to cost about 2.3% of GDP in 2014. Hence there has been concern on its contribution to Maldives’ continuing fiscal deficit. Furthermore it is believed that the high level benefit may also have potential longer term adverse impact on labor supply and saving behavior.

This Universal Social Protection brief was produced by Changqing Sun of the World Bank Group. It was reviewed by Isabel Ortiz and Loveleen De of the ILO.

References

Maldives Pension Administration Office, Annual Report, 2012-2015 www.pension.gov.mv.

80 Recommendations for improving the Child Money Mongolia Programme1 The Universal Child Money Programme • The programme needs to be embedded in a legislative framework to safeguard its sustainability, coverage and adequacy.

Mongolia’s universal Child Money • The programme should introduce Programme (CMP) is one of the an automatic indexation on the country’s flagship programmes cost of living to guarantee its and an essential al part of its social efficiency in terms of poverty protection system, which is among the reduction impact. most progressive and comprehensive of Asia. In May 2015, the Government • Mongolia being a middle of Mongolia is one of the country’s income country needs to flagship programmes and an essential maintain universality of its social al part of its social protection system, protection and promote decent which is among the most progressive employment for increased social and comprehensive of Asia. In May insurance coverage, as to fully 2015, the Government of Mongolia activate the redistribution together with the UN agencies agreed function of social protection on recommendations to complete a systems, beyond solely poverty social protection floor which would reduction. therefore address the remaining social protection deficits. 1. What does Mongolia’s Child Among the recommendations, Money Programme look like? stakeholders emphasized on the importance of maintaining the Programme characteristics and universality of the Child Money reach Programme and reinforcing both its legal framework and adequacy of The programme, which went through benefits, as being the most effective different phases of development response to tackle poverty, in (see below) offers an allowance of particular rural poverty. MNT20,000 (around USD10 in June 2016) per month to all children aged

¹ These recommendations represent a consensus among stakeholders obtained during the national dialogue on defining a social protection floor for Mongolia conducted in 2013-2014.

81 Mongolia: The Universal Child Money Programme

Figure 1. Definition of a social protection floor for Mongolia, agreed by the National Dialogue conducted in 2013-2014

Source: UN, Government of Mongolia, 2015: Social protection assessment based national dialogue: Definition and cost of a social protection floor for Mongolia (ILO, Ulaanbaatar)

0 to 17 years old including children The CMP is financed through the under correctional service and living Human Development Fund (HDF), abroad. However, children of migrant which is accumulated from mineral workers are not covered by the resource taxes. The CMP is perceived as programme, a gap that was brought a mechanism for redistribution of the to the attention of the Government2. wealth of the mining sector across the population in an equitable and efficient ² See ILO, 2016: Report to the Government: Assess- manner. ment of the social security legislation in view of a possible future ratification of the Social Security (Minimum Standards) Convention, 1952 (No. 102) (ILO, Geneva)

82 Mongolia: The Universal Child Money Programme

Two parameters of the programme financed from general tax revenues4; can explain its success: first, its focus (d) the Child Money Programme and on children: The main beneficiaries of other right-based social protection the programme are children, which are allowances financed from mineral automatically eligible at the time of civil revenues through the Human registration with the State Registration Development Fund; and (e) active General Office (SRGO) (no additional labour market policies, employment procedure is required); second, its and local development programmes effective payment mechanism: (financed from the State’s budget). The monthly benefit is paid directly through an automatic bank transfer to Figure 2. Overall structure of the social eligible families. As a result, by the end protection system in Mongolia of 2015 a total of 1029,4 thousand3 or nearly 100 per cent of children aged 0 Ministry of Labour to 17 years old received this benefit. and Social Protection

Health and social Labour and social The place of the CMP in the insurance general welfare services overall social protection system office general office of Mongolia - Social health -Social welfare, The CMP is part of a comprehensive insurance including CMP -Social insurance -Employment social protection system, reflecting promotion the strong attachment of Mongolia’s Source: Ministry of Labour and Social Protection, 2016. society to solidarity and social justice. This system has five main ⁴ Mongolia provides an interesting example of uni- components: (a) universal social versal maternity benefit, as it offers universal- ma health insurance scheme, partially ternity protection coverage through a combination of different mechanisms. Formal employees are or fully subsidized by the State for covered by social insurance on a mandatory basis certain groups of the population; and receive a replacement rate of 100% of their covered wage for four months. Herders, self-employed (b) compulsory and voluntary social and workers of the informal economy can join the insurance securing compensation and scheme on a voluntary basis, and receive maternity benefits in case of maternity, sickness, cash benefits for four months at a replacement rate of 70 percent of their selected reference wage after unemployment (only compulsory 12 months of contributions. In addition, maternity scheme), employment injury, old- cash benefits under the Social Welfare Scheme are provided to all pregnant women and mothers of in- age, disability and survivorship; (c) fants regardless their contribution to the social in- social assistance/welfare programmes surance scheme, status in employment and nation- ality. The benefit, equivalent to approximately US$ 20 per month (2015) is paid from the fifth month of ³ National Registration and Statistics Office: pregnancy for 12 months. Maternity care is provided Mongolian Statistical Yearbook 2015 through the universal (tax funded) health care system (ILO, 2016).

83 Mongolia: The Universal Child Money Programme

As of the end of 2013, coverage under from MNT99.3 billion to MNT256.8 the mandatory social health insurance billion between 2010 and 2015, scheme was nearly universal, resulting in 49.4 per cent of the extending to more than 90 per cent of population receiving some social the population. The same year, a 71.6 welfare benefit, including the CMP per cent of the economically active allowance6, impacting positively on population was insured under the poverty levels. During the period social insurance system (table 1), either 2010 to 2014, the national poverty under the compulsory or voluntary headcount index decreased from scheme. However, those contributing 38.7 per cent to 21.6 per cent, and to the voluntary scheme represented, in rural areas from 49.0 per cent to in 2013, only 23.3 per cent of those 26.4 per cent.7 who are eligible to participate, i.e. Without the CMP, only 19 percent herders, self-employed, informal of the population would receive economy workers and unemployed. some social welfare benefit.8 The The total coverage expanded to 85 per CMP is therefore one of the flagship cent in 2015, a rise mainly attributable programme of the Government, to increased registration among self- together with the universal Maternity employed and herders under the Allowance paid during 12 months to voluntary scheme. all pregnant women, irrespectively of In addition, the tax-funded social their activity and employment status. welfare system plays an important As noted above an important financing role in providing public support to source of non-contributory social members of vulnerable groups such protection schemes is a Human as older people and people with Development Fund (HDF), established disabilities, orphans, infants, women in accordance with the Law on Human during maternity or single mothers Development Fund approved by the with many children who are unable Parliament in November 2009. The HDF to live independently. There are 71 builds on revenues from the mineral programmes stated by law targeting and mining sectors and has an objective specific groups of the population of redistributing wealth equally among accounting for 1.1 per cent of the all citizens of Mongolia. The Child Gross Domestic Product (GDP) in Money Programme is one of the main 2014.5 Social welfare expenditure programmes funded by the HDF. more than doubled, increasing ⁶ Onishi, J. & Chuluun, T. (2015). Review of program design and beneficiary profiles of social welfare ⁵ Source: Ministry of Finance, 1 June 2016. programs in Mongolia. Washington, D.C.: World Bank Programmes implemented by the Social Welfare Services General Office under the Law on Social ⁷ NSO, 2014. Welfare, 2012; the Law on Social Security for People ⁸ Onishi, J. & Chuluun, T. (2015). Review of program with Disabilities, 2005; Law on Social Security of design and beneficiary profiles of social welfare Senior Citizens, 2005; and Law on Supplementary programs in Mongolia. Washington, D.C.: World Allowance for Honored Senior Citizens, 2008. Bank

84 Mongolia: The Universal Child Money Programme

In 2014, the aggregated expenditures MNT25,000 for all children in January for social welfare, State subsidies to 2007. the social insurance pension fund, In 2007, UNICEF conducted an and social protection expenditures assessment of the CMP impact on of the Human Development Fund poverty reduction. The analysis showed amounted to 3.4 per cent of the GDP. that the efficiency of income targeting was poor due to flaws in proxy means Evolution of the Child Money testing and implementation issues. The Programme since 2005 analysis concluded that the ‘universal’ programme had a slightly larger impact Rising copper prices and swelling tax on poverty reduction than a targeted revenues resulted in a budget surplus in programme had due mainly to exclusion 2005, offering an enabling environment errors associated with proxy means for strengthening social protection. In testing. January 2005, the CMP was introduced In January 2010, the Government as Mongolia’s first programme targeting discontinued the CMP and replaced it by the poor. annual cash transfer of MNT120,000 to Households with three or more all citizens. children, identified as poor using a In September 2012, the newly elected proxy-means test were entitled to an Government issued a resolution to re- allowance if children had mandatory introduce the CMP, providing a cash immunizations, lived with parents, transfer of MNT20,000 per month to and were not engaged in worst forms all children under 18 years, financed of child labour. In addition, for those from the HDF. This resolution with children aged 8 to 17 years old, continues guiding the CMPs’ the transfer was also conditioned on implementation. The resolution school enrolment. By June 2005, the kept the CMP unconditional and programme has reached all its targeted universal, with a simplified procedure population, or 61 per cent of all children for implementation. Citizens apply at aged 0 to 17 years old. any commercial bank and open up In 2006, copper and gold prices, as well an account to receive their children’s as government revenues continued to money; the banks do not charge any climb, and in July 2006, the CMP was service fees as part of their Corporate transformed into a quasi-universal Social Responsibility. programme: discontinuing the use of the targeting mechanisms, but retaining a soft form of conditionality on school enrolment. The benefit remained identical until the introduction of quarterly cash transfer of

85 Mongolia: The Universal Child Money Programme

2. What are the main impacts the 2014 Household Socio-economic of the CMP? Survey, the CMP significantly reduces monetary poverty. Estimations While no comprehensive impact indicate that the CMP contribute evaluation of the CMP has yet taken to a 12 per cent reduction of the place, several research findings poverty incidence and reduced confirm the progressive nature of the poverty gap by 21 per cent. If the programme. Not only the benefit only children are considered, the incidence is nearly twice as high in achieved poverty reduction is slightly the poorest quintile compared to higher. The CMP appears particularly the richest quintile (Gassmann et al., powerful in reducing poverty in the 2015), the allocation of the transfer countryside and in the Western is pro-poor with 34 per cent received parts and the highlands of Mongolia by the poorest group (Onishi and (Tserennadmid, forthcoming). Chuluun, 2015). Based on an analysis of

Table 1. Summary of Child Money Programme Number Timeframe Level of of children Targeting and conditionality benefit covered • Households living in poverty identified using means testing • Households with 3 or more children 01/01/2005- MNT3,000 • Vaccination 01/06/2005 per month 350,000 • Not engaged in worst forms of child labour • Enrolled in school • Living with parents

• Households living in poverty identified using means testing • Vaccination 01/06/2005 – MNT3,000 650,000 • Not engaged in worst forms of child la- 01/07 2006 month bour • Enrolled in school • Living with parents

• Universal coverage conditioned to 01/07/2006 – MNT3,000 932,000 school enrolment 01/01/2010 per month • Living with parents 01/07/2007 - MNT25,000 01/01/2010 per quarter 932,000 Since MNT20,000 • Universal coverage without any condi- 01/10/2012 per month 967,900 tionality

Source: Ministry of Population Development and Social Protection, 2015

86 Mongolia: The Universal Child Money Programme

3. What’s next? and the debate would need to be informed also by empirical evidence The general elections held in June from other countries (including 2016 are a critical opportunity to on sustainable ways of financing ensure that social protection remains programmes). In this light, the possible a priority for the new Government ratification of the Social Security amidst the current serious economic (minimum standards) Convention, downturn. In August, the newly 1952 (No.102) would provide useful elected Government has announced guarantees for sustaining Mongolia’s a number of measures to reduce social protection system, including public expenditures, including re- the Child Money Programme. introducing the income targeting of the Child Money Programme. This move implies reducing coverage This Universal Social Protection brief to 60 per cent of children – using was written by Celine Peyron Bista and an existing household database Lkhagvademberel Amgalan (ILO), and which was created through proxy Enkhnasan Nasan-Ulzii (UNICEF). The means testing of households for a brief was reviewed by Gaspar, Roberto smaller programme (the food stamps Benes and Catalina Gomez of UNICEF, programme). This and other measures as well as Prof. Dr. Franziska Gassmann will yet need to be approved by the of the UNU-MERIT/Maastricht Graduate new parliament (a similar initiative School of Governance. was rejected just six months before the recent elections); but the fiscal situation appear to leave little leeway for belt-tightening measures – at least References on the short term. The debate therefore is expected Fajth, G. & Claudia Vinay (2010). MDG Insights to continue in Mongolia on how Issue Paper #1: Conditional Cash Transfers: A to find sustainable solutions for Global Perspective. Available at: www.unicef. financing popular social protection org/socialpolicy/files/Conditional_Cash_ measures such as the CMP and what Transfers_A_Global_Perspective.pdf forms of targeting could sustain best the universal social protection Gassmann, F., François, D., Zardo Trindade, floor. Advocacy for maintaining the L. (2015). Improving labor market outcomes universality of the Child Money for poor and vulnerable groups in Mongolia. Programme, as well as the social 102320-MN. Washington D.C.: World Bank. protection system in general would require strong national evidence on programme impact and efficiency;

87 Mongolia: The Universal Child Money Programme

International Labour Organization. 2016: UNICEF, 2015, Cash Transfer as a Social Assessment of the social security legislation Protection Intervention: Evidence from UNICEF of Mongolia in view of a possible future Evaluations 2010-2014. Available at: www. ratification of the Social Security (Minimum unicef.org/evaluation/files/Social_Protection_ Standards) Convention, 1952 (No. 102) Evaluation_Synthesis_Final.pdf (Geneva). Available at http://www.ilo.org/ asia/whatwedo/publications/WCMS_462848/ United Nations, Government of Mongolia. lang--en/index.htm 2015: Social protection assessment based national dialogue: Definition and cost ILO. 2016: Financial assessment of the of a social protection floor in Mongolia proposed reform to the social security system (Ulaanbaatar) Available at http://www.ilo.org/ for older persons and a proposed new pension asia/whatwedo/publications/WCMS_369999/ scheme for the herders and self-employed lang--en/index.htm persons (Ulaanbaatar) Available at http:// www.ilo.org/asia/whatwedo/publications/ Tserennadmid, A. (forthcoming). Analyses on WCMS_486332/lang--en/index.htm effects of changes of CMP on income poverty of children through microsimulation of the Ministry of Population Development and Social Household Socio-Economic Survey data. Protection and the World Bank. 2015: Review Ulaanbataar: UNICEF. of Program Design and Beneficiary Profiles of Social Welfare Programs in Mongolia. Available at: http://documents.worldbank.org/ curated/en/599141468185351818/pdf/99518- WP-World-bank-group-eng-Box393201B- PUBLIC.pdf

Onishi, J. & Chuluun, T. (2015). Review of program design and beneficiary profiles of social welfare programs in Mongolia. Washington, D.C.: World Bank

UNICEF. 2007: Child benefits and poverty reduction: Evidence from Mongolia’s child money programme (New York).

UNICEF Mongolia. 2014. Analysis of the situation of children in Mongolia (Ulaanbaatar).

88 in poverty in 2014, mainly in rural areas. At the same time, more than Mongolia 50% of households were reported to have older family members living Universal old-age pensions with them. Population livelihood measurement surveys conducted between 1975 and 2000 furthermore identified the elderly as a group In Mongolia, every older person particularly vulnerable to poverty. receives a pension. The Mongolian old-age pension system comprises 1. What does the old-age both a social insurance and social pension system look like? welfare pension schemes. The social welfare pension provides a minimum Mongolia inherited a defined benefits income security to those who have (DB) pension system, based on a pay- not qualified for a social insurance as-you-go (PAYG) financing method pension. that provided universal coverage and high levels of benefits. The pension In recent years, Mongolia has system was fully funded by the State displayed an impressive pace budget based on some financial economic growth. As most countries redistribution mechanisms. In 1995, in the world however, Mongolia is the Government reformed the facing the challenges of an ageing system and introduced a contributory population, especially also in pension among other new social attempts to ensure universal old insurance branches. In 1999 a age protection. From the mid-1970s Notional Defined Contribution (NDC) to today, the older population aged scheme was established for workers 60+ has increased at a greater pace born after 1960, with the intention of relative to the overall population. addressing the financial sustainability For the period until 2050, this and coverage issues of the DB system. pattern is projected to become even The NDC scheme applies only for more pronounced. Combined with those born after 1960. an increasing life expectancy, the By the end of 2015, 255,600 old- prevention of old age poverty and age pensioners, equivalent to the the maintenance of the Mongolian entire population in pensionable pension system has become a more age, were receiving benefits from the complex task. contributory Social Insurance Fund, Despite impressive economic under the DB scheme. Due to significant growth over the past decade, 21.6 reduction of the replacement rate per cent of the population remains under the NDC scheme, in 2015, the

89 Mongolia: Universal old-age pensions

Table 1. Two parallel contributory pension schemes of Mongolia

DB wage-based pension NDC scheme (for those born after Old age pension scheme (for those born before 1960) 1960)

Law on Pensions and Benefits Law on Individual Pension Regulatory Law provided by the Social Insurance Insurance Contribution Accounts Fund (1995) (1999)

At least 20 years for a full At least 15 years for a minimum Years of contribution pension, 10–20 years for a pension reduced pension

Retirement age 60 for men and 55 for women 60 for men and 55 for women

Mandatory insurance: Mandatory insurance: Employee and employer each Employee and employer each pay pay 7 per cent of reference 7 per cent of reference salary salary Voluntary insurance: Voluntary insurance: Unemployed and self-employed Unemployed and self-employed Contribution rates workers, and herders pay 10 per workers, and herders pay 10 per cent of reference income. cent of reference income Range of pensionable incomes/ Range of pensionable earnings: incomes/ earnings: between minimum wage and ten between minimum wage and times minimum wage ten times minimum wage

(45 per cent + 1.5 per cent Notional account accumulation for each additional year of (contributions earmarked for old contribution over 20 years) age + notional interest calculated Pension rates multiplied by the highest salary according to average growth in for any five continuous years covered wages over the past three among the last 20 years of years) / (annuity factor or life contribution. expectancy at retirement)

Source: Law on Pension and Benefits provided by the Social Insurance, 1994; Law on Individual Pension Insurance Contribution Account, 1999.

90 Mongolia: Universal old-age pensions

Parliament adopted an amendment Table 2. Number of pensioners per to the Law on Individual Pension programme Insurance Contribution Account. The amendment provides alternative Scheme Number of beneficiaries choice for participants born between 255,600 people or over 1960 and 1979 expected to receive 100 per cent of the male an old-age pension under the current Defined benefit population over 60, and NDC scheme to opt for a pension old age pension female population over benefit under either the initial DB or insurance 55 years old (due to early retirement pensions) in NDC, choosing the higher pension. In 2015. 2015, among the new pensioners born Defined All new pensioners after1960, therefore first pensioners contribution eligible under the NDC being eligible to the NDC pension, all old age pension scheme in 2015 opted to opted for a pension calculated using insurance receive a DB pension the DB formula. Non- contributory 16,200 people benefitted Besides the old-age benefits provided military in 2015 by the contributory (mandatory pension benefit and voluntary) pension fund, the scheme Ministry of Population Development Non- and Social Protection (MPDSP) also contributory 1,871 older persons in social welfare 2015 implements a non-contributory social old-age benefit welfare pension for those women Social welfare 333,300 (double above 55 and men above 60 who cash supports counting) people in for older have not contributed or do not have 2013. the required years of qualification persons to access the contributory pension1. Source: SIGO, SWGO, 2015. The Social Welfare General Office (SWGO) of MPDSP administers the Several laws govern the legal social welfare pension, as well as framework of Mongolia’s pension a number of other social welfare system, amongst others the Law on programmes targeting at vulnerable Social Insurance (1994), the Law on people. As of May 2016, 1,871 older Social Welfare (2012) and the Law on persons receive a social welfare Pensions and Benefits provided by the pension, mainly women who account Social Insurance Fund (1994). for 1,3422. 2. How was this major breakthrough achieve ¹ At least 10 years for a partial pension, 20 for a full pension for both voluntary and mandatory DB schemes; 15 years with both the voluntary and The introduction of the NDC system in mandatory NDC scheme (SIGO, 2015). 1999 did not reform key parameters ² MPDSP, May 2016

91 Mongolia: Universal old-age pensions such as retirement age to address beneficiaries in years to come (those sustainability issue. The system who have not sufficiently and are not guarantees a minimum pension currently contributing to the social provision at a level that will continue insurance fund), the government requiring substantial fiscal subsidies has taken steps to increase coverage over the long run. Although first under the voluntary scheme. In pensioners under the NDC scheme January 2015, an amendment to the are only arriving now, a significant Law on Social Insurance introduced decrease in the benefit level is more flexibility in the contribution anticipated. Finally the NDC reform schedule. A recent measure (February did not address the issue of universal 2016) requiring affiliation to the social coverage that the voluntary scheme insurance scheme as a condition failed to achieve. It is only in recent for accessing commercial banks’ years, that coverage significantly loans with a lower interest rate also increased under the voluntary resulted in significant improvement in scheme. By 2015, almost a million the coverage rate among herders. workers (989,036) were contributing Moreover, over the past three years, to the social insurance fund counting the government has been preparing for 85.0 per cent of the economically a broader reform of the old-age active population.3 pension system aimed at achieving The universality of the pension scheme universal coverage and strengthening in Mongolia relies in part on its large the pension system. The State Policy share of the population contributing on the Pension Reform, adopted at to the scheme in particular among the Parliament in 2015, introduces the formal economy. However, a multi-tier system that articulates despite recent fast progress in a universal minimum pension increasing voluntary coverage (from combined with a contributory pension 9.2 per cent of the herders, informal for all, and supplementary accounts. and self-employed workers in 2012 Parameters for implementation of the to 16.3 per cent in 2015), still only State Policy on the Pension Reform 10.4 per cent of herders in age of are now being discussed. contributing are registered under the voluntary schemes (2015). In addition 3. What are the main results their period of contribution tends to in terms of impact on people’s be discontinued mainly due to the lives? nature of their income. Aware of the potential cost implication Mongolia has introduced a large- resulting from a large increase in the scale contributory and non- number of social welfare pension contributory program for old-age pension. To date, all older people ³ SIGO, May 2016

92 Mongolia: Universal old-age pensions above statutory pensionable age people in Mongolia consider themselves receive a pension under the defined as poor due to the fast rising prices of benefit scheme, inherited from the consumer goods (UNFPA). Thus, a crucial socialist economy. The social welfare element would be the adaption of the pension corresponds to Mongolia’s pension benefits to the actual costs of recognition of the universal right to living. To conclude, poverty still remains social protection. It also responds to a significant obstacle despite the strong Mongolia’s long tradition of social economic growth and the introduction justice and in particular concern of large-scale programs for a universal for supporting herders, including old-age pension scheme. older herders. This is of particular Furthermore, the establishment of importance due to decreasing support a multi-tier system of which the first of traditional family structures and pillar will correspond to a universal has many positive effects on the well- minimum pension and articulated with being of older people. A study shows the contributory scheme will ensure a that they feel better off as the social better adequacy of the level of pension. welfare pension enables the purchase In order to reach universal contributory of basic necessities as well as the pension among the economically active participation in social activities (Mujahid, population, the government is proposing Banzragch, & Oyun-Erdene, 2010). the introduction of subsidies for certain A universal pension is therefore a categories of the population, following successful instrument to prevent older the success of the mandatory and people from falling into poverty and universal social health insurance scheme reducing the vulnerability of households. already existing in Mongolia. Furthermore, while social health Finally, with political changes and insurance is universal and fully subsidized pressure caused by the recent economic for persons in pensionable age, a crisis and abrupt decrease in the mining universal minimum pension improves revenues, the government, trade access to health care services and drugs unions and business sector are strongly that are not covered and only partially advocating for the ratification of the reimbursed. However, the pension Convention on Social Security (minimum scheme itself does not sufficiently standards) Convention, 1952 (No.102) cover all medical expenses of the older as a safeguard to the existing social people and inadequate medical service protection system. Mongolia has one provision remains an issue (Mujahid, of the more expanded social protection Banzragch, & Oyun-Erdene, 2010). systems in the region, with guarantees However, a challenge is the significant that provide universal social protection at inflation of the past few years as the each stage of life, e.g. maternity benefits, pension is not indexed to inflation. child allowance, old-age pension. A Despite the basic income, 80% of older recent assessment of Mongolia’s social

93 Mongolia: Universal old-age pensions

protection legislation concludes that JICA (2015): Data Collection Survey on Pension the country complies with the minimum Systems in Mongolia. http://open_jicareport. requirements for ratification, which jica.go.jp/pdf/12185609.pdf would place Mongolia as the second country of Asia and the Pacific in ratifying Mujahid, G., Banzragch, O., & Oyun-Erdene, the Convention No. 102. N. (2010). Assuring income security in old age: views of the Mongolian elderly. UNFPA This Universal Social Protection brief Country Office. was produced by Simon Neuland of GIZ. It was reviewed by Isabel Ortiz, Celine http://s3.amazonaws.com/academia. Peyron-Bista, Lkhagvademberel Amgalan edu.documents/35183577/Mongolia- and Loveleen De of the ILO. Pensionsprintversion-2010.pdf?AWSAcc essKeyId=AKIAJ56TQJRTWSMTNPEA&Ex pires=1468930726&Signature=urydN7f nmc1SeEsaCLeTZNY5E%2F4%3D&respo References nse-content-disposition=inline%3B%20fi- lename%3DAssuring_Income_Security_in_ ILO (2016): Financial assessment of the proposed Old_Age_View.pdf reform to the social security system for older persons and a proposed new pension scheme World Bank (retrieved 2016): http://data. for the herders and self-employed persons worldbank.org/country/mongolia; http://databank.worldbank.org/data/reports. ILO (2016): Assessment of the social security legislation for the ratification of the Social Security (Minimum Standards) Convention, 1952 (No. 102)

Government of Mongolia, UN, ILO (2015): Social Protection Assessment Based National Dialogue. Definition and Cost of a Social Protection Floor in Mongolia. http://www. ilo.org/wcmsp5/groups/public/---asia/- --ro-bangkok/documents/publication/ wcms_369999.pdf

ILO (2015). World Social Protection Report 2014/15. Geneva: International Labour Office.http://www.ilo.org/wcmsp5/groups/ public/---dgreports/---dcomm/documents/ publication/wcms_245201.pdf

94 Main lessons learned Namibia • The universal social pension combined with social services The Basic Social Grant for can be an effective instrument to all older persons lift older people out of extreme poverty, to strengthen their dignity and to stimulate local economies.

Namibia’s old age social pension, • The impressive impact the renamed in 1998 as Basic Social pension has had on the reduction Grant (BSG), guarantees all Namibia’s of poverty in old age motivated residents over 60 years of age a the government to nearly double monthly unconditional allowance of 1 the Basic Social Grant from N$ 600 100 Namibian dollars (N$) per month. to N$ 1 100 in 2015/2016. Further It corresponds approximately US$ 78 increases are planned. per month lifting the grant beneficiary well above the poverty line. She or • The provision of a regular and he however shares the grant with adequate pension benefit can the extended family, especially by also benefit other members of the extended family, especially supporting the schooling and well- grandchildren. being of possible grandchildren. • The payment system must 1. What does the pension be made accessible e.g. by system look like? using modern ICT technology, biometric identification and Namibia gained independence 26 years mobile pay points in order to ago and currently has a population minimize transaction costs to of 2.1 million people, 57 percent of both rights holders and duty whom live in rural areas. Over the bearers. 2001 to 2011 period, the population growth rate declined from 2.6 percent • Importantly, universal pensions addressed the plight of the poor per annum to 1.4 percent, while older persons who were denied the Total fertility rate (TFR) declined opportunities during the more from 4.1 children per woman to 3.6 than 100 years of colonialism and children per woman. Apartheid, giving them a sense Since gaining independence in 1990, of dignity and full citizenship. Namibia’s economy has enjoyed strong and stable growth. Its nominal • The challenge is still to address gross national income per capita the high inequality between stood at US$ 5 870 in 2013, with a different population groups.

95 Namibia: The Basic Social Grant for all older persons

• Namibia has had significant flow professional social welfare services. of income from Southern Africa In Namibia there is at least one Customs Union (SACU) and the programme covering seven out of mining industry but has to find a the eight essential life course risks1. new balance as both of these are on Unemployment is not covered by any the decline. In a country with very major programme. The unemployment high inequality, unemployment rate was 28.1 percent in 2014 and and informality the challenge is how to finance social protection affected particularly the youth. There without burdening the poor are close to 30 schemes that can be through high consumption taxes. classified as social protection measures and the administration of them fall • The government’s increased under several Ministries or agencies. current investments in social protection, health and education Coverage contribute to the reduction of inequalities in opportunities and The actual coverage figure of the incomes and to the development old age pension varies depending of a comprehensive and inclusive on data source used but is most national social protection system. likely well over 90 percent. There are regional variations. Remote areas purchasing power parity value of US$ are underserved while some urban 9 490. Based on this single indicator, centres exhibit figures over 100 Namibia was upgraded to an Upper percent. Middle Income Country (UMIC) in 2009. However, this masks the high Benefits level of inequality in Namibia, which has a Gini coefficient of 0.60 (2013), Every woman and man 60 years of one of the highest in the world. age and older resident in Namibia is eligible to this non-contributory old age Structure of the overall system grant. The Basic Social Grant is financed through the State budget. The cash The system of Namibia’s social transfer has been increased steadily but protection is rather comprehensive not systematically as it is not regularly compared to other countries in the adjusted to inflation. In 2015-2016 the region. The system consists of non- amount was increased from N$ 600 contributory (social assistance), and to N$ 1 100 (approximately US$ 78) contributory schemes (social insurance, as part of the social provisions of the including state managed and private systems). The public sector social ¹ These eight risk areas to be covered are identified in ILO Social Protection Reports as sickness; assistance also involves extensively maternity; old age; employment injury; invalidity; survivors; family allowances; and unemployment.

96 Namibia: The Basic Social Grant for all older persons

Harambee Prosperity Plan prepared The contribution of the mining sector by the Office of the President. Persons has been decreasing while that of the with disabilities with a doctor’s non-mining companies has increased. certification receive the same amount The share of the latter of government’s as older people. War Veterans’ tax revenue is eleven percent. Subvention is about double the A very specific feature in Namibia is amount. Older persons, persons with the revenue derived from the South disabilities and war veterans are also African Customs Union (SACU) totalling exempted from paying for any health to 36.9 percent of the tax revenues of services and are beneficiaries of the the state. This component has been a state financed funeral benefit scheme very significant source of revenue but is that pays for a burial amounting to N$ on a declining trend. 3 000 (US$ 215). Revenues from SACU and taxes and royalties from mining have contributed Financing substantially to the fiscal space for financing social protection. As both Tax revenues constitute 93.5 percent of of these revenue sources have been government revenues in Namibia. Out declining recently the issue will be to of the tax revenues 43.1 percent come find a solution to the volatility and from taxes on individual incomes and foreseen further decrease of these profits. Income tax yields 27.6 percent sources. Discussion continues on the units and taxes on company profits 14.0 further potential contribution of the percent units of the total. The mining mining industry and the currently sector contributes about 12.6 percent rather non-existent property taxation. of the GDP. It’s contribution to the total The social sector comprising of of state revenues through direct taxes Education, Gender Equality and is 3 percent plus another 3 percent to Child Welfare; Health and Social the state’s total revenues as royalties. Services; Sport, Youth, and National Service; Veterans Affairs, and Poverty Eradication and Social Welfare, was allocated the largest share of the budget in the 2016-2017 financial year, receiving N$ 28.5bn or 43.2 percent of total planned expenditure. This is due to the significant allocations given to Education, with N$ 12.8bn Namibian pensioners celebrated the increase for Basic Education and N$ 3.4bn for of the national old age pension from N$600 to Higher Education, and to Health and N$1,000 in 2015. Social Welfare (N$ 7.2bn). The high Photo by the Informante newspaper, 1 April allocation to the social sector is aimed 2015.

97 Namibia: The Basic Social Grant for all older persons

Table 1. State tax revenues by source at poverty reduction and improvement in Namibia (percent 2014/2015 budget estimates) of social welfare through, among other interventions, the increase of the old Percent age pension from N$ 1 000 to N$ 1 Source of tax revenue 100, the rollout of food banks and the provision of free access to primary and 01. Taxes on income and 43.1 profits secondary education. Income tax on individuals 27.6 The share of social protection expenditure of Namibia’s GDP is higher Company tax (Mining 3.2 percent of the than that in Sub-Saharan Africa in total) 14.0 average. Expenditure on older people ( Non-mining 10.8 is particularly remarkable (3.2 percent percent of the total) compared to the average of 1.1 percent Other tax on incomes and 1.6 of GDP in the region). profit 02. Property tax 0.6 Legal aspects and Institutional 03. Domestic taxes on goods 18.8 arrangements and services 04. Taxes on international 36.9 Namibia has an extensive social trade and transactions protection system, managing client 05. Other taxes 0.6 applications, records and payments Total tax revenue 100 for more than 15 percent of the Source: Estimates of revenue, income and population. For this purpose there expenditure 1 April 2015 to 31 March 2018. Republic is a significant legal framework and of Namibia 2015.

Table 2. Expenditure by scheme type (2010/2011)

Percent of Percent of SP GDP expenditure Social Assistance Tax-funded cash grants, run by 1,9 28,9 various ministries Contributory Social Insurance (State run) 0,3 4,7 Private insurance 4,4 66,4 (a) Retirement funds 2,9 43,7 (b) Medical schemes 1,5 22,7

Total 6,0 per cent 10 per cent

Source: Namibia Social Protection Floor Assessment, Report to the Government by ILO and the Oxford Policy Management (OPM) South Africa Office, International Labour Organization, 2014.

98 Namibia: The Basic Social Grant for all older persons a range of institutions. There are foodbank was introduced to mitigate extensive interactions or partnerships extreme poverty and ensure that all between public organisations and Namibians have access to basic food private agencies (including payment for survival. New structures such agents, banks and Namibian Postal as street committees assessing and Services) to deliver services. registering beneficiaries have been Already in mid-1990s Namibia introduced. introduced a rather advanced technology for the payment system. 2. How was this achieved? For instance the cash dispenser machines on mobile vans used The elements of the social welfare biometric identification with system in Namibia originate from fingerprints. While mobile pay points different historical periods and from and biometric identification increased diverse philosophies. security and accuracy, privatization The origins for the system are found also increased the costs. Further, in the South African pension system while access has been improved, yet that dates back to 1928. Namibia still some recipients in rural areas was under South African rule but the shoulder heavy transaction costs as South African apartheid government the distance to the pay point can be did not extend the social pension long and transportation is costly. This to Namibia until 1949. As in South also limits the coverage in scarcely Africa, it was first provided to the populated areas. white population alone and gradually A new boost towards eradicating extended to universal coverage of poverty and reducing inequality was the elderly population with a racially- given by the new government. In defined tiered pension rate. In 1965, 2015 it established a new Ministry the old age benefit was amended to for Poverty Eradication and Social include coloured (non-‘native’ and Welfare. Management of social grants non-‘white’) residents, and in 1973 have been transferred to the mandate the benefit was extended to black of this new ministry. The newly created Namibians. Ministry of Poverty Eradication and Removing discrimination from Social Welfare has plans in place to the pension system started after come up with a comprehensive Social independence in 1990. The Protection Strategy and monitoring pensionable age for both men and and evaluation framework as well as women was changed to 60 years in for looking into issues of systems and the National Pensions Act of 1992. governance. A blueprint was adopted Further, in 1994 the pension was made that outlines strategies and expected equal across all pensioners. outcomes. As an interim measure, a Reduction of poverty and inequalities

99 Namibia: The Basic Social Grant for all older persons has been seen by the governments after grant, even the wealthy are eligible to independence as the major challenge it. Exclusion errors are minor – almost to be tackled and social welfare grants all of the poor older people are covered. have been one of the instruments In fact, many subsistence farmers towards that goal. experience a significant increase of their incomes after crossing the age line of 60 3. What are the main results in years. terms of impact on people’s Regular income makes older people lives? even more valued members in families and communities. The National The impact of the Namibian social Household Income and Expenditure assistance system overall is positive. Survey of 2009 -2010 shows that a It is estimated that in 2009-2010 it large share of this income is used by the reduced headcount poverty on the elderly to the benefit of grandchildren, higher poverty line by more than 30 and in particular their nutrition and percent, and severe poverty by an schooling. Interviews conducted by even bigger proportion. HelpAge International in communities The Basic Social Grant has had major recently testify concretely also how impact in reducing poverty in old age. important the incomes of older people Due to the universal nature of the are for the economy of the community.

Figure 1. Development of the Basic Social Grant 1990-2016

On the basis of the 2009/10 National Household Income and Expenditure Survey (NHIES) the individual pension of that time (N$ 500) lifted the person well above the upper boundary poverty line of N$ 378.

100 Namibia: The Basic Social Grant for all older persons

And most importantly, regular pension income guarantees a life in dignity for older people.

4. What’s next?

The recent major increase for the Basic Social Grant in 2015-2016 from N$ 600 to N$ 1,100 was justified by the evidence on the impressive impact the pension has had to the reduction of poverty in old age. Further increases The Basic Income Grant was distributed through NamPost savings accounts. Photo are being planned. While the Basic courtesy of Basic Income Grant (BIG) Coalition. State Grant has been very successful, other challenges of the social into the equation in the Namibian protection system as a whole have context. become more obvious. Furthermore, a systematic manage- The discussion continues on the costs ment information system based on and merits of universal versus targeted a single registry is necessary for the social protection transfers in a context consolidation of the social protection of high inequality. One of the new system towards becoming equitable, in- initiatives on the table has been the clusive and sustainable. universal Basic Income Grant (BIG) In spite of the relative comprehensive- that was given a try in 2008 and 2009 ness of the Namibian social protection in the village of Otjivero in Namibia. system, important gaps remain. These Obviously, while the right to have are now being addressed, inter alia, access to social protection must be through the Harambee Plan for Pros- universal and equitable, elements perity (HPP) which was developed to of universal provisions and targeted, complement the National Development specific provisions have both their Plans and the government’s Vision 2030. complementary functions in the social The HPP is a focused and targeted ap- protection system as a whole. More proach to achieve high impact in defined research and feasibility assessments priority areas over a four year period will be needed to design a functional with specific outcomes targeting the system from existing elements. Also a poor. The Namibian Government has ex- path out of poverty, an empowering pressed its firm commitment to equality, ‘graduation’ mechanism needs to be universalism and the extension of com- baked in. Regional disparities, long prehensive social policies as an instru- distances and uneven administrative ment to reduce poverty and inequality capacities will bring more challenges and for reaching prosperity for all.

101 Namibia: The Basic Social Grant for all older persons

This Universal Social Protection brief Inga Rademacher: Fiscal Policy and Growth. was produced by Ronald Wiman and Boosting Employment and Competitiveness in Heidi-Maria Helenius of the European Namibia. Friedrich Ebert Stiftung – Namibia. Union Social Protection Systems 2011. Programme (EU-SPS), and Petronella Masabane of the Directorate of Social Estimates of revenue, income and Welfare Services, Ministry of Health and expenditure 01 April 2015 to 31 March 2018. Social Services, Namibia. The brief was Republic of Namibia 2015. reviewed by Isabel Ortiz and Loveleen De of the ILO. Basic Income Grant Coalition, Namibia http://www.bignam.org/

Basic information on the universal social References pension in Namibia: HelpAge International Pension Watch Chiripanhura, Blessing and Niño-Zarazúa http://www.pension-watch.net/country-fact- Miguel: Social safety nets in Namibia: file/namibia/ Structure, effectiveness and the possibility for a universal cash transfer scheme. 15th The European Union Social Protection Annual Symposium of Bank of Namibia, 2013. Systems Programme (EU-SPS) website: www. thl.fi/eu-sps Devereux, Stephen: Social Pensions in Namibia and South Africa. Institute for Development Studies (IDS), University of Sussex, England, 2001.

Dorfman, Mark: Pension Patterns in Sub- Saharan Africa, World Bank, Social Protection and Labor. Discussion Paper No. 1503, 2015 Harambee Prosperity Plan 2016/17 – 2019/20. Namibian Government’s Action Plan towards Prosperity for All, Office of the President, 2016.

ILO and the Oxford Policy Management (OPM) South Africa Office:Namibia Social Protection Floor Assessment, Report to the Government. International Labour Organization, 2014.

102 benefit amounts ranging from Rs. 200 (USD2.00) per month per child for the Nepal child grant to Rs. 1,000 (USD10.00) Universal old-age and per month for the elderly benefit. In FY 2015-2016, the total amount disability pensions, and for the cash transfer schemes was other universal allowances approximately USD 150 million or 0.7 percent of the total GDP. These allowances are not explicitly targeted to the poor, they are intended for 1. What does the system look those who are considered socially like? and/or economically vulnerable.

Structure of the overall system Financing and Institutional Arrangements The Government of Nepal runs a varied portfolio of social protection programs The social security allowance (SSA) consisting of social insurance, cash and (or, social pension) is the largest in-kind social assistance programs, and of the social assistance programs various labor market programs. The in Nepal. Old-age pension, single fiscal cost of the current portfolio of SP woman’s pension, the child grant, programs in Nepal reaches 2.5 percent disability and endangered ethnicity of GDP (2011-12). The lion’s share These transfers are fully financed by (about 1.5 percent) of this spending is government’s own budget. on public sector pensions. Programs Department of Civil Registration that can be classified as social assistance (DOCR) under the Ministry of Federal programs, usually intended to assist the Affairs and Local Development poor and the vulnerable, amount to (MOFALD) is the agency charged with about 0.9 percent of GDP altogether. the responsibility of administering the social security allowances (SSAs) Coverage and benefits in Nepal. MOFALD recently stepped up its institutional commitment to The social security allowance (SSA) strengthen its capacity to manage (or, social pension) is the largest SSA by creating a new DOCR. Headed of the social assistance programs by a Director-General at the rank of in Nepal. Old-age pension, single joint secretary, the DOCR enjoys a woman’s pension, the child grant, degree of autonomy although it still disability and endangered ethnicity remains subject to oversight and allowance reach about 2.2 million general control by MOFALD. individual beneficiaries, with the The delivery of SSAs currently relies

103 Nepal: Universal old-age and disability pensions, and other universal allowances

Table 1. Nepal Social Security Allowance (SSA) – Overview of Coverage and Benefits SSA: Not eligible if receiving a pension from the government/army/police

Coverage Year Benefit budgeted SSA Type Description implement- Amount¹ for (FY ed 2015-16)

Allowance for all dalits² Senior Citizen and Karnali residents over Rs. 1000/ 1,046,273 Jul-95 Allowance the age of 60; all others month over the age of 70

Allowance for single Single women women 60 years or older; Rs. 500/ 659,336 1996-97 Allowance widows of all age month

Allowance for those who cannot go about daily life Full Disability even with help from others Rs. 1000/ 30,860 Allowance with red ID cards from the month District office of Women 1996-97 and Children.

Allowance for those who Partial Disability Rs. 300/ can go about daily life with 31,324 Allowance month help from others Allowance for those Endangered Rs. 1000/ that belong to one of 10 23,346 2009 Ethnicity Allowance month endangered ethnic groups

Grant for children under Child Protection 5 in Karnali and poor Rs. 200/ Grant (nutrition 469,362 Sep-09 Dalit children under 5 month grant) everywhere

In FY 2015-2016, approximately 2.2 million beneficiaries were reached through the SSA.

¹ The government recently doubled the SSA budget from NPR16 to NPR32 million to be effective FY2016- 2017. However, the details on the exact amount for the benefit levels for the 5 schemes are currently being worked out. ² Dalits have historically faced exclusion and deprivation along multiple dimensions, and are therefore the most disadvantaged ethnic group in Nepal.

104 Nepal: Universal old-age and disability pensions, and other universal allowances

mostly on manual methods of record- Figure 1. Timeline of key policies for the keeping. Beneficiaries enrol or renew social pension in Nepal their enrolment once a year at a nearby Village Development Committee (VDC) office. The VDC forwards the beneficiary 1994 CNP-UML roster to the District Development government Committee (DDC), which then collates announced FY 1995 - 1996 program - Old-age Allowance the VDC rosters into a document that (75+) indicates the number of beneficiaries for each category of SSAs (e.g., old- FY 1996 - 1997 age, single women, etc.) and sends it Widow allowance FY 2008 - 2009 to MOFALD. Although DOCR possesses (60+) a management information system - Old-age in Karnali Disability and Dalits Allowance (MIS) that is capable of managing the Allowance (reduced to 60+) entire business process of SSA delivery, - Old-age Other Citizens Allowance the MIS currently does not capture (reduced to 70+) beneficiary records except in about FY 2009-2010 - Endangered 25 of the country’s 75 districts where ethnicities - Child Protection allowance MOFALD/DOCR manually digitized Allowance - Fully and partially - Single Women Disabled Allowance the existing beneficiary records. Allowance (widows, For payments, DOCR relies on hand never married and delivery of the benefits in cash through separated women 60+) VDC secretaries. The payments take place three times a year and a survey of a small sample of beneficiaries has March 2010 3 indicated frequent delays in payments. - Widow Allowance MOFALD/DOCR are planning to shift (age restriction FY 2014-2015 removed) to electronic record management with -Partial Disability the MIS and benefit payments via bank quota removed accounts. FY 2015-2016 2. How was this achieved? - Old-age FY 2016-2017 Allowance doubled The following figure summarizes the - All SSA allowances timeline on how key policies for the doubled social pension in Nepal has been achieved.

³ Assessment of Social Security Allowance Program in Nepal, Government of Nepal, National Planning Commission (May 2012).

105 Nepal: Universal old-age and disability pensions, and other universal allowances

Political economy, stakeholders involved in the process, what was the main driving force behind the policy change?

The current day social security allowance program began in 1994. The Communist Party of Nepal- Unified Marxist-Leninist (CPN- UML) government announced a new scheme in which senior citizens over the age of 75 would be given a monthly allowance of NRs. 100. While this program was first piloted in five districts, it was rolled out nationwide during FY 95-96 by the Photo by: Soyesh Lakhey Home Ministry. In the next fiscal year, age and widow allowances was the Nepali Congress came to power increased to NRs 500 per month; and added two new schemes— monthly allowance of NRs. 100 • Members of ten “endangered” to widows over the age of 60 and ethnicities would receive an disabled citizens. From the same allowance of NRs 1,000 per month; year onwards, the Ministry of Local and, Development (MLD) took charge of the management of the allowance • The disability allowance was split program. into the fully disabled and partially In 2008, the Maoist government disabled allowances. Fully disabled introduced major changes to the beneficiaries would receive NRs. program. They modified existing 1000 per month while partially schemes and introduced new disabled beneficiaries would receive schemes which are listed below: NRs. 300 per month. A quota was specified per district for the number • They adjusted the eligibility for of partially disabled beneficiaries senior citizen allowance from 60 who could enroll in the program. to 70 years for all non-dalit citizens and 60 years for Dalits and senior From September 2009 onwards, citizens in Karnali districts, a set the Maoist government added a of five poor districts in the far new scheme called child protection western area of Nepal; grant or child grant which would • The benefit amount for both old- provide Dalit children and children

106 Nepal: Universal old-age and disability pensions, and other universal allowances in Karnali under the age of five a • For both old-age pensions, 35 monthly allowance of NRs. 200. The percent and for widow pensions, Maoist government also expanded 46 percent of eligible beneficiaries the category of widow allowance to are not receiving benefits; include all single women over 60, i.e., those who were widows, never • Leakage of benefits to ineligible married and legally separated from beneficiaries appears to be a relatively their husbands. In March 2010, the minor issue and there is no conclusive Supreme Court ruled that widows evidence of overlaps between old- of any age should be eligible for the age and widow pensions; benefit and this further expanded the coverage of widow allowance. • Cash transfer programs seem to More recently, in FY 14-15, the quota have a very low impact on poverty.5 for partially disabled applicants has In the absence of these transfers, been removed and in FY 15-16, old the poverty headcount is estimated age allowance was doubled to Rs. to increase by only 0.4 percentage 1000/month, which included Rs. 500 points, from 25.2 to 25.6 percent. for medical expenses. Both the initial introduction of the The analysis of the impact of cash SSAs and their subsequent changes/ transfers on poverty is based on expansions tended to be announced earlier data and does not reflect the as part of the government’s annual recent changes, namely doubling the budget speech/process. While the benefits, the Government of Nepal increases in the benefit levels have have made on the SSA program. been in the right direction from the Furthermore, in a 2011 report social protection perspective, these published by Nepal Participatory decisions tended to follow political Action Network and HelpAge considerations and have never International that surveyed a sample been based on evidence-based of 488 respondents show that the considerations of their effectiveness. social impact of non-contributory pension appears to be significant. 3. What are the main results Majority of the survey respondents, in terms of impact on people’s lives? ⁵ The analysis of the impact of cash transfers on poverty was made using the Third Nepal Living Analysis of the most recent Nepal Standards Survey (NLSS III) 2011 and used the section on “Transfers, Social Assistance and Other Income”. Living Standards Survey (NLSS) The NLSS III used a sample size of 7200 HHs of which (2011) show that: 4 approximately 960 people were reported as receiving benefits. It is important to note that while the NLSS III ⁴ Improving Social Protection for the Vulnerable in data are nationally representative, the sample size is Nepal: A Review of Social Assistance Programs and relatively small and there are also potential for under- Expenditures, World Bank (2014). reporting within household survey data.

107 Nepal: Universal old-age and disability pensions, and other universal allowances approximately 80 percent, have been beneficiaries of the old-age allowance and a high proportion of them responded that the immediate changes they experienced include fulfilment of basic needs such as food, clothes and medicine. Increased self- reliance has enhanced the senior citizens psychological confidence for survival and increased their overall happiness.6

4. Key indicators

• Number of persons covered: 2.2 Photo by: Soyesh Lakhey million individual beneficiaries threat to the fiscal space for the • Adequacy of benefits: Before the next decade provided that there are government doubled the value no significant policy changes in the of the old-age pension from Rs. benefit amount or eligibility criteria. 500 to Rs. 1000 per month, the SSA cash transfers amounted to 5. Conclusion about 1.2 percent of an average poor household’s consumption. A significant share of Nepal’s Altogether, the cash transfers had population live just above the poverty negligible impact on household line, and risks and deprivations from poverty, as the poverty headcount a variety of sources remain, including dropped from 25.6 percent to 25.2 exclusions due to geographical, percent.7 social, and historical factors as well as certain life cycle risks. Nepal is also • Sustainability of the system? Given vulnerable to climate change and the increasing trend of social natural disasters. All of these call for protection expenditure, fiscal an effective social protection system sustainability is a major concern of to shield the poor and the vulnerable the GoN. However, the analysis also from the risks they face and reduce indicates that the MOFALD cash their vulnerability.8 transfers and will not pose a major The GoN’s portfolio of the current SSA

⁶ Effectiveness of Non-Contributory Social Pension ⁷ Ditto. The data source for this analysis was the in Nepal, Nepal Participatory Action Network and 2011 Nepal Living Standard Survey. HelpAge International (2011).

108 Nepal: Universal old-age and disability pensions, and other universal allowances

program has steadily increased since its inception in 1994 from providing cash grants to 75+ senior citizens to now include five schemes. The GoN has continued its commitment to the SSA, whereby, they have now doubled the total budget from NPR 16 billion to NPR 32 billion for FY 2016-2017.

This Universal Social Protection brief was produced by Robert J. Palacios of the World Bank Group. It was reviewed by Isabel Ortiz and Loveleen De of the ILO.

References

Assessment of Social Security Allowance Program in Nepal, Government of Nepal, National Planning Commission (May 2012).

Effectiveness of Non-Contributory Social Pension in Nepal, Nepal Participatory Action Network and HelpAge International (2011). Improving Social Protection for the Vulnerable in Nepal: A Review of Social Assistance Programs and Expenditures, World Bank

⁸ Improving Social Protection for the Vulnerable in Nepal: A Review of Social Assistance Programs and Expenditures, World Bank (2014).

109 Main lessons learned

South Africa • South Africa has demonstrated that the extension of social Universal disability grants protection to persons with disabilities is feasible and affordable for middle-income countries.

Grant for Persons with • Social grants for people Disabilities with disabilities go beyond compensation for extra daily According to its 2011 Census, 2.87 living costs caused by long-term million people in South Africa or ill health or a disability. They 7.5 per cent of the population lives provide an income replacement with a disability. It is one of the only for those unable to engage in countries in sub-Saharan Africa to paid work and compensate for provide an allowance for people with the loss of income for those disabilities (PWDs). that have a partial loss of their The South African National earning due to their disability. Development Plan 2010–30 • It is essential to have political emphasizes the need for an inclusive will and commitment of the social protection system to address government, particularly to vulnerability and responds to the increase public expenditures on needs of persons with disabilities, social protection. Today, South older persons, children and Africa redistributes roughly 3.5 particularly orphans. per cent of its GDP through The Disability Grant (DG) is provided social assistance programmes. to adults over 18 years of age and is the only non-contributory allowance • The creation of a specialized provided to persons of working age management institution, namely in the country. The grant also covers the South African Social persons with chronic illnesses such as Security Agency (SASSA), made delivery of grants transparent HIV/AIDS, which has a prevalence of and independent from political 18 per cent among people between 1 considerations and the payment the ages of 15 to 49 years. The channels made it easier to reach amount of the grant stands at 1,500 people in difficult situations and South African rands (ZAR) (US$112) remote areas. and is fairly generous, considering

¹ People with chronic illnesses benefit from the Disability Grant but this is not legislated.

110 South Africa: Universal disability grants

South Africa’s status as a middle- for Social Development (DSD) is income country. responsible for policy-making and oversight while the South African Social Security Agency, created 1. How did the Disability in 2006, administers and delivers Grant develop? all social grants. The creation of SASSA reduced fragmentation and The Disability Grant (DG) was one inconsistency within the previous of the first social security schemes system, where the benefit levels and to be introduced as a means-tested eligibility criteria for social grants were benefit in 1937. It was initially decided by nine different regions and targeting the poor white population. disbursed by different paymasters. In 1947, the DG was extended to all SASSA delivers benefits through South Africans, but with different fully equipped and well-staffed benefit levels and different income mobile units as part of its Integrated thresholds depending upon race. Community Registration Outreach Incremental harmonisation began Programme (ICROP). The ICROP in the 1970s and parity between facilitates beneficiary enrolment races was reached only by way of and registration, issues smart cards, the South African Social Assistance maintains an online database, raises Act in 1992. Today, the DG covers awareness, provides access to pay nearly 1.2 million beneficiaries. It is points, and conducts home visits by paid to citizens, permanent residents medical staff and social workers to and persons with “refugee status” in ensure that individuals unable to go South Africa. to the hospital or leave their homes— Figure 1. DG beneficiaries, 1997-2013 due to disability or sickness—have access to services and benefits. In 2007, South Africa ratified and signed the UN Convention on the Rights of Persons with Disabilities (UNCRPD). The Convention facilitates the enforcement of the rights of persons with disabilities and requires states to actively take action to improve their living conditions, by Source: Department of Welfare and DSD Annual Reports 1997-2013 providing support to help them to develop to their full capacities. In South Africa, two institutions are Additional provisions are also active in the design and delivery of contained in the Continental Plan social protection. The Department of Action of the African Decade of

111 South Africa: Universal disability grants

Persons with Disabilities (2010-2019), of Health or contracted with SASSA. the AU policy instrument on Disability. Further eligibility criteria include Prevalence of HIV/AIDS in South Africa an income-based means test and is 18 per cent among people between valid identification documentation. the ages of 15 to 49 years. Currently, The grant may be paid temporarily a person living with HIV is eligible for for between six and 12 months or the DG if it has resulted in some kind permanently. The monthly amount of activity limitation and if the CD4 of the grant is ZAR1,500 ($112) and count used to assess the immune lapses upon death of the beneficiary, system of a patient is below a certain failure to claim for three consecutive threshold. For people living with HIV, months, absence from South Africa or the DG is the only non-contributory admission to a state institution for care. scheme that provides income security If the state institution has a contract in case of loss of work capacity due with the state to care for beneficiaries to HIV infection and free health of the DG, the DG is reduced to 25 care. In 2003, 41 per cent of the DG per cent of the maximum amount for beneficiaries were people suffering four months after admission to the from ‘retroviral disease’ or ‘immuno- institution. Upon discharge, the full DG compromised’. is re-instated. In 2004, the government introduced Eligibility for the grant is reassessed free anti-retroviral drugs (ARVs), which regularly for temporary Disability Grant significantly improved the health payments. Coverage of the DG grew conditions of people living with HIV. from 611,325 beneficiaries in 2000 to Many of those that had significant 1.24 million eligible persons in 2015. improvements in CD4 counts lost their Complementary programmes for eligibility to the DG. This may explain recipients include free health care, and why the number of DG beneficiaries being allowed to apply for “indigent has steadily declined since 2007 (see status” to support households Figure 1). to pay for water, electricity and accommodation. The Reconstruction 2. What are the benefits and Development Programme (RDP), provided? provides free retrofit houses with accessible features to any South Persons living with a physical or mental African citizen with disability and a disability which prevents them from monthly income of less than ZAR3,500 working for more than six months can ($288). apply for a temporary or permanent Two additional grants are available to DG. Their eligibility is determined support DG beneficiaries. The Grant- through a medical assessment done by in-Aid aims to support persons in a doctor either from the Department need of support or care by another

112 South Africa: Universal disability grants person because of their physical PWDs. However, these protective or mental disability. It is available measures need to be complemented for the beneficiaries of the DG, the by job creation strategies and Older Person’s Grant and the War campaigns to educate employers not Veterans Grant. The Social Relief of to discriminate against persons with Distress (SRD) programme serves as disabilities. temporary assistance for applicants Research into the impact of the DG to overcome financial pressure during has so far been limited. According to the application period (up to 21 days). studies, 77 per cent of recipients cite Depending on how a disability has food as their first item of expenditure been acquired, beneficiaries may also and 59 per cent say that food is the be eligible for grants from the Road item on which they spend most of Accident Fund, the Unemployment their money. Recipients also spend Insurance Fund or Compensation for money on electricity and water bills, Occupational Injuries and Diseases which varies with the infrastructure Fund. available in the regions. Other South Africa still struggles with strong expenditure items are purchases social inequality with a GINI coefficient of clothes, funeral policies, debt of 0.69 after social grants have been repayments, rent payments, payment disbursed to beneficiaries. of school fees and remittances. Receipt of the DG, like all other grants, facilitates financial inclusion of recipients because all beneficiaries have an electronic smartcard for identification and payments. The DG benefits the whole household of the person with disabilities or living with HIV, and therefore has direct or indirect impact on the livelihoods of a larger population. 3. What is the impact on people’s lives? 4. What’s next?

In a society where unemployment In future, links with employers and stands at 24.3 per cent, many affirmative action policies to integrate PWDs report being stigmatized and persons with disabilities into the experiencing severe barriers to access labour market should be pursued and the labour market. The DG provides prioritised to enable beneficiaries some level of support to facilitate to graduate from poverty. This is inclusion in the labour market of already envisaged in the National

113 South Africa: Universal disability grants

Development Plan 2030 and required Kelly, G. 2013, Regulating access to the by the UNCRPD. To remove the barriers disability grant in South Africa, 1990-2013 for PWDs, the policy framework for Centre for Social Science Research. Working integration of PWDs exists and needs Paper No. 330 December 2013. University of to be operationalized through pro- Cape Town. ISBN 978-1-77011-321-3. active and social understanding of disabilities. Leubolt, B., 2014, Social policies and redistribution in South Africa.

This Universal Social Protection brief International Labour Office; Global Labour was produced by Johan Strijdom University. Geneva: ILO, 2014 and Oumar Diop of the Department (Global Labour University working paper: No. of Social Affairs, African Union 25, ISSN: 1866-0541. Commission, and Thea Westphal of the ILO. It was reviewed by Johanna Mandonsela, V. 2010. Presentation on South Sekele of the Department of Social Africa’s Basic Social Protection Floor to the Development, and Isabel Ortiz, Valérie Special Event on South-South Cooperation. Schmitt and Loveleen De of the ILO. United Nations HQ, NYC.

Nattras, N. 2006. Disability and Welfare in South Africa’s era of unemployment and AIDS. References CSSR Working Paper No. 147 February 2006. Cape Town. De Paoli, M., M. E.A and A Backer Grønningsæter. 2012. “The ARV roll out and SASSA, 2013, Implementation of CROP in the disability grant: a South African dilemma?” South to enable the socially excluded and Journal of the International AIDS Society 2012. isolated access to Social Protection. Technical Workshop on South-South exchange on Interview with Thomson Sithole, 06.05.2015, integrating social policies and the delivery of Directorate Disability and Older Persons social protection floors 29thMay 2013 Siem benefits, Department of Social Development, Reap Cambodia. Pretoria. Stats SA Library Cataloguing-in-Publication Johannsmeier, C. 2007. The Social and (CIP) Data Economic Effects of the Disability Grant for People with Disabilities and their Households – Census 2011: Profile of persons with A Qualitative Study in KwaZulu Natal Province. disabilities in South Africa / Statistics South ISBN: 978-1-86840-624-1 Africa. Pretoria: Statistics South Africa, 2014.

114 South Africa Main lessons learned • South Africa has demonstrated Universal pensions that extending social protection to older persons is feasible and affordable for middle-income countries.

Older Persons Grant • It is essential to have political will and commitment, particularly, to South Africa is ranked as an increase public social protection upper-middle income country expenditures. Today, South but characterized by high poverty Africa redistributes roughly 3.5 incidence and inequality among per cent of its GDP through the population. The GINI coefficient social assistance programmes. stands at 0.85 without considering • Along with other grants, the the effect of the Older Person’s Grant Older Person’s Grant (OPG) is (OPG). Further, inter-racial inequality one of the most important tools is signified by a mean per capita for poverty reduction in the income of ZAR934 ($76.9) of the black country. This is evidenced by the and ZAR7,641 ($614.3) of the white reduction in poverty incidence population in 2008. among older persons from 55.6 South Africa has a long history as per cent in 2006 to 36.2 per cent a welfare state and since the end in 2011. of the apartheid era in 1994, the social protection system has played a • OPG also promotes gender crucial role in combatting poverty and equality (eligibility ages for males and females were harmonized in inequality. It is also the first African 2011), and addresses inter-racial country to have introduced a social disparity, through a gradual pension for older persons. The Older harmonization of the benefit Person’s Grant (OPG) is provided to amounts for different racial all people above 60 years of age and groups. varies between ZAR1,500 ($112) and ZAR1,520 ($114). It is estimated that • The creation of a specialized the OPG along with other social grants institution, the South African bring down the high inequality in Social Security Agency (SASSA), society from a GINI coefficient of 0.77 made delivery of social grants (without grants) to 0.60 (with grants) transparent and independent (OECD, 2015). from political considerations.

115 South Africa: Universal pensions

non-white workers were legalized, • South Africa uses an integrated which contributed to expand the system for grant delivery, grant to the non-white population. monitoring and evaluation (M&E). The integrated M&E system Further, the amount of the old-age helps to continuously improve grant was gradually harmonized for delivery. Biometric identification different racial groups with a view to of beneficiaries limits the chances achieve parity. During the 1980s, the for identity theft. pension for the black population was increasingly raised while that for the white minority was decreased. By 1. How was the older 1992, the means test was equalized persons grant developed? for everyone regardless of race, which led to an increase of the income Means-tested social pensions were threshold for the black population. introduced in 1928. Originally, a Older Person’s Grant (OPG) is a social social pension existed primarily for grant in South Africa whose design white male workers who had no has changed significantly in the last access to occupational pensions and decade. Two of these design changes mixed-race women over 60 years have significantly contributed to of age. With time, trade unions for achieving universal social protection.

Figure 1. Maximum Older Person’s Grant paid to South African black and white pensioners, 1925-2000

Source: Seekings/Nattrass 2005:131

116 South Africa: Universal pensions

Firstly, when it was introduced in 1928, prove that the beneficiary is still alive. it entitled all white men older than 65 SASSA conducts the review and must years and mixed-race women over 60 notify beneficiaries three months prior years of age to an old-age grant. With to the review. In cases where payments time, OPG was expanded to the rest are made electronically, the review of the population – including citizens, automatically takes place once a year. permanent residents and refugees Geographic variation in coverage is with legal status – and the eligibility mostly due to income differences age for men and women was equalised between regions. The highest effective to 60 years in 2011. Secondly, the coverage rates are found in the grant is delivered based on criteria metropolitan region of Johannesburg defined by the Department of Social and Pretoria. Development (DSD) and applied by SASSA, to ensure that decisions are Operational arrangements transparent and replicable. The DSD is responsible for policy formulation With the establishment of SASSA and implementation support, while in 2006, delivery of the OPG has SASSA is an entity within DSD which improved significantly as the scheme administers social grants. is now underpinned by coherent and transparent guidelines. Biometric 2. What does the OPG look like? identification is used at pay points to mitigate risks such as theft of the Personal Identification Number Benefits and coverage (PIN) and identity theft. At the time of enrolment, beneficiaries provide OPG is an income-tested, monthly their photograph, fingerprints payment of ZAR1,500 ($112) for and voice recordings in English or persons aged 60-75 years and ZAR1,520 seven vernacular languages. This ($114) for those above 75 years. It is information is saved in the database paid to around 3 million older persons of the payment operator and a in South Africa, reaching up to 100 per SASSA-branded MasterCard given cent coverage in some jurisdictions. to each beneficiary, which serves as OPG is given to citizens, permanent the identity and payment card. Voice residents, and refugees with legal status. verification is offered as an alternative Applicants have to provide information to certify beneficiaries who use PIN about their income and financial assets code identification and at points where for the means test. If a grant needs to be no fingerprint scanners are available. reviewed, additional documentation is SASSA contracts Cash Payment Services required including greater details on the (CPS) to disburse the social grants reported income and a life certificate to nationwide. CPS works in partnership

117 South Africa: Universal pensions with Grindrod Bank, which issues bank to disability or sickness—have access cards to beneficiaries. The account is to services and benefits. free of monthly charges and allows full access to traditional banking services Payment Channels including ATMs, electronic fund transfers and point of sale transactions. Three different payment channels SASSA cardholders can also transact exist, all of which use the SASSA card. offline where there is no formal The first channel is SASSA pay point banking infrastructure. Every channel areas, where the payment provider requires beneficiaries to be identified CPS sets up mobile ATMs. second through their SASSA card, which can channel is payment into Grindrod only be done through successful bank accounts. The third channel biometric identification. Beneficiaries is payment at institutions such as who use a PIN are identified through old persons’ homes on a fixed date, the PIN code and voice recordings. In where beneficiaries must authenticate this way, the payment remains secure their identity with their SASSA card. and beneficiaries’ identities can be Payment dates vary and are released verified even when there are no a little in advance to prevent robberies fingerprint scanners. of the trucks carrying cash. Armed SASSA delivers benefits through security guards are present at pay fullzy equipped and well-staffed point areas. mobile units as part of its Integrated Community Registration Outreach 3. What are the main Programme (ICROP). The ICROP impacts on people’s lives? facilitates beneficiary enrolment Recipients of the Older Person’s Grant (OPG) share their pensions within the households. Estimates indicate that one grant reaches up to six persons in a recipient’s household. Family structures in South Africa are fluid Left: Mobile payment unit Right: SASSA-branded MasterCard and often multi-generational rather than nuclear, which is largely due to and registration, issues smart cards, segregation policies of the apartheid maintains an online database, raises era and high HIV/AIDS prevalence. An awareness, provides access to pay HIV/AIDS prevalence rate of 18 per cent points, and conducts home visits by among the working age population medical staff and social workers to leads to many people having chronic ensure that individuals unable to go to illnesses and disabilities. Older persons the hospital or leave their homes—due often raise their grandchildren because

118 South Africa: Universal pensions the parents may have passed away due other grants. Older persons still to HIV/AIDS related illnesses. In such suffer from the long-term effects of circumstances, the grants serve as a apartheid and are often perceived reliable source of income and are shared as being needier than other groups. within large households. Compared to South Africa is considering introducing non-recipient households, households a mandatory contributory social in receipt of public old-age grants have insurance scheme that provides higher shares of expenditure on food pension, death and disability benefits. and education. This will help to provide adequate and Research has shown that there is a affordable benefits, pool risks across positive correlation between living in a the labour force and achieve social household with an OPG recipient and solidarity, complementing both non- finding employment. Women in the 20- contributory social assistance and 30 age group in recipient households private insurance. are up to 15 per cent more likely to be Another gap in South Africa’s existing employed and 9 per cent more likely social protection system is the lack to participate in the labour force than of income support for unemployed those in non-recipient households. persons of working age, i.e. Recipient households are more likely to between 19 and 59 years. This may experience positive health outcomes result in the redistribution of OPG for children, especially girls, e.g. better and other grants to unemployed height-for-age and weight-for-height. members of beneficiary households, thereby lessening the impact on the 4. What’s next? intended beneficiaries and creating implicit subsidies for unemployed South Africa has come a long way since persons without a defined strategy the end of the apartheid era in 1994. or scheme to provide protection. Today, its social protection system is one of the most comprehensive in This Universal Social Protection brief the region. While OPG is currently was produced by Johan Strijdom a means-tested benefit, DSD plans and Oumar Diop of the Department to universalize the grant. Different of Social Affairs, African Union models have been financially assessed Commission, and Thea Westphal of since 2013 and tripartite consultations the ILO. It was reviewed by Thomson with stakeholders and representative Sithole and Anthony Makwiramiti of bodies carried out to choose the most the Department of Social Development, suitable policy option. Universalization and Isabel Ortiz, Valérie Schmitt and of OPG is a priority in South Africa Loveleen De of the ILO. because it is more accepted politically than universalization of

119 South Africa: Universal pensions

Oosthuizen, M. 2012, South Africa’s State References Old Age Pension. Recent Developments in the Role and Design of Social Protection Government of South Africa, n.d. Department Programmes Workshop, 3-5 December 2012, of Social Development, Poverty and Brasilia. Inequality data for 2014/2015. OECD Economic Surveys: South Africa. 2015. Finn, A., Leibbrandt, M. and I. Woolard, 2009. www.treasury.gov.za/publications/other/ Income & Expenditure Inequality: Analysis of OECD%20Economic%20Surveys%20South%20 the NIDS Wave 1 Dataset. Discussion Paper Africa%202015.pdf no. 5. University of Cape Town. Statistics South Africa. 2014. Statistical Government of South Africa, 2015, Older release P0211, Quarterly Labour Force Survey Persons Grant, www.gov.za/services/social- Quarter 4, 2014. Pretoria. benefits-retirement-and-old-age/old-age- pension

Hagen-Zanker, J. Morgan, J. and C. Meth, 2011, South Africa’s cash social security grants: Progress in increasing coverage. Overseas Development Institute, London. 2011

Interview with Thomson Sithole, 06.05.2015, Directorate Disability and Older Persons benefits, Department of Social Development, Pretoria.

Leubolt, B., 2014, Social policies and redistribution in South Africa / Bernhard Leubolt; International Labour Office;

Global Labour University. - Geneva: ILO, 2014 (Global Labour University working paper; No. 25, ISSN: 1866-0541 ; 2194-7465 (web pdf))

Noble, M., Barnes, H., Wright, G. and Noble, S. (2006) The Old Age Grant: A Sub- Provincial Analysis of Eligibility and Take Up in January 2004, Pretoria: National Department of Social Development, Republic of South Africa.

120 Thailand Main lessons learned • In a country with a rapidly ageing Universal Pensions population, a large informal sector and a relatively high incidence of poverty among older persons, a non-contributory pension can go a long way towards reaching those Old-age allowance who do not have access to any social protection in old age. In 2009, Thailand succeeded in expanding pensions for older persons • Ineffective targeting procedures through the implementation of a non- prevented needy as well as contributory old-age allowance. eligible older persons from Until recently, Thailand’s pension receiving a pension. A universal system included several contributory scheme introduced in 2009 schemes for government officials, resulted in over 5.5 million new beneficiaries by 2013. private sector employees and informal economy workers. However, • Poverty among the elderly coverage of the latter group was very has fallen, which can largely limited. Overall, only 20 per cent of be attributed to increased older persons had access to some pension coverage. Increasing level of protection. and indexing benefits, as well In the face of an ageing population and as strengthening the legal and a large informal sector, the country financial foundations of the sought new ways to protect older scheme, could further strengthen persons without coverage. In 2009, a its positive impacts. non-contributory old-age allowance was introduced and Thailand reached • Even though the benefit levels have increased steadily over universal coverage soon afterwards. time, the pension still does not provide sufficient protection. The 1. An ageing population non-contributory allowance can with low pension coverage be complemented by additional schemes, such as the recently While much of South-East Asia is established National Savings Fund, characterized by relatively youthful which strives towards providing populations, Thailand is ageing rapidly. more comprehensive protection Older persons will make up nearly for people in old age.1 one-third of the total population by

2050, as seen in Figure 1. ¹ As the fund started in 2015, the effectiveness of the scheme cannot yet be assessed.

121 Thailand: Universal Pensions

Figure 1. Population distribution by age under the Social Security Act, 1990 group and sex, 2010 and 2050 (section 33). Additionally, private sector employees can contribute to a provident fund that gives them a lump-sum payment upon retirement. Those who were previously insured under section 33 and cease their employment can continue to be insured under section 39. The contributions and benefits are based on a reference income of 4,800 Thai Source: UN Population Division (July 2012) baht (THB), which is less than the minimum wage. In 2020, the population of persons Workers in the informal economy aged 60 and above is expected to can choose to contribute to one of surpass the number of children for two options under the Social Security the first time in Thailand’s history.2 Act, section 40. The first option does Yet, until 2009, no more than 20 per not provide any form of retirement cent received any form of old-age benefits, while the second option pension, often despite decades of provides a lump-sum old-age benefit. hard work. At the end of 2010, only 84 individuals Thailand’s pension system has were insured under section 40 (SSO, continuously developed over the 2016). years and includes various schemes for government officials, private sector 2. A need for a non-contributory employees and informal economy old-age allowance workers. Depending on the number of years of contribution, government Previously, there was a large gap in officials receive a lump-sum payment protection for informal sector workers or a pension under the Pension for and inadequate benefits for retirees Civil Servants Act, 1951. Furthermore, from the formal sector. This led the they can also avail the Government Government to develop an old- Pension Fund, which provides a lump- age allowance for “underprivileged sum payment upon retirement. elderly”, defined as persons at least 60 Depending on the duration of years of age without enough income the contributions, private sector to meet necessary expenses, or who employees can receive a monthly are unable to work, abandoned or pension or a lump-sum payment have no caregivers. The old-age allowance was ² Children are defined as persons below 15 years of designed at the national level, but age.

122 Thailand: Universal Pensions was implemented through local targeting procedures altogether in authorities who were responsible 2009, coverage significantly increased. for overseeing the scheme, selecting beneficiaries and paying benefits. 3. A window for universal However, local authorities differed pensions widely in their interpretation of the national guidelines and application In April 2008, Thailand’s government of the eligibility criteria. There was opted to implement the old-age some abuse and leakages in addition allowance as a universal scheme to the exclusion of more than 50 per as one part of its stimulus package cent of the underprivileged elderly to mitigate the global economic (Suwanrada and Dharmapriya, 2012, crisis and accelerate recovery. All p. 158). individuals aged 60 and above When it debuted in 1993, the residing outside of public elderly allowance reached just 20,000 facilities and without access to regular individuals. Reforms to the targeting pension payments became eligible methodology were made in 1995, for the benefit. As a result, coverage 2002 and again in 2005, which resulted expanded remarkably. in increased representation of elderly Under the universal scheme, the advocates and local community supervision of the allowance is members in the local committees centralized under the Department in charge of the selection and of Social Development and Welfare disbursement processes. As a result of with local bodies responsible for this and increased budget allocations, registering “residential inhabitants”, the number of beneficiaries went up a status required to receive the old- steadily in the years that followed. Still, age allowance, and for distributing many eligible beneficiaries remained payments collected in person. outside pension coverage. When the Registration happens once each Government dropped ineffective year. Registrants can either appear Figure 2. Expansion of the old-age allowance, in person at their local authority’s from 1995 to 2013 office or sign up at a roving mobile registration unit. Payments are then either collected in person at the local authority’s office or deposited directly into a bank account. Beneficiaries may also designate another individual to receive the benefits for them. The universal old-age allowance serves as the first and only form of pension for many of those working Source: ILO, UNDP (2011)

123 Thailand: Universal Pensions in the informal economy. It is also a the pension amount still remains far complementary source of income for from the poverty line of THB2,647 retirees from the formal sector. per month in 2014 and minimum Simultaneously, the Government wage of THB300 per day. Indexation started to provide a matching to the consumer price index, a contribution under the Social Security percentage of the minimum wage or Act, section 40. This contributed other benchmark could help ensure to increasing membership of the that the scheme provides sufficient voluntary social insurance to 2.4 income security for older persons. million by the end of 2014. In 2009, Thailand amended its Elderly Act to include the universal old-age 4. What’s next? allowance in national legislation. However, stipulations for setting Since its introduction in 1993, the benefit levels exist only in ministerial old-age allowance increased steadily decrees, leaving it vulnerable to fiscal from THB200 per month in 1993 to and political pressures. a maximum of THB1,000 in 2012, For around 30 million informal as seen in figure 3. The adoption economy workers who are not of a tiered methodology in 2012 members of the Government Pension recognizes greater need for income Fund or SSO pension scheme, the support as people grow older, due Government aims to reduce the to the reduced capacity to work and income parity gap through the increased health and long-term care National Savings Fund, which started needs. operations in 2015. Workers can Figure 3. Evolution of the old-age benefit, contribute THB50-13,200 per year to 1993-2013 receive a monthly pension of up to THB7,000 upon retirement.

This Universal Social Protection brief was produced by James Canonge and Loveleen De of the ILO. It was reviewed by Isabel Ortiz, Valérie Schmitt and Nuno Cunha of the ILO, Usa Source: ILO, UNDP (2011) Khiewrord of HelpAge and Dr Thaworn While the extension of coverage Sakulphanit of the Health Insurance and deepening of benefits has made System Research Office in Thailand. discernible improvements in the lives of Thailand’s older persons,

124 Thailand: Universal Pensions

Wiener, M. 2012. “Thailand’s matching References defined contribution programs for the informal sector”, in R. Hinz et al. (eds): Foundation of Thai Gerontology Research and Matching contributions for pensions: A review Development Institute. 2015.National Old of international experience(Washington, DC, Age Pension System Reform (Bangkok). World Bank), pp. 275-286.

ILO. 2009. Thailand. Pension reform in times World Bank. 2012. Reducing elderly poverty in of crisis: A report requested by the Ministry of Thailand: The role of Thailand’s pension and Finance (Geneva). social assistance systems (Washington, DC).

Royal Thai Ministry of Social Development and Human Security. 2010. Amendment of the 2003 Elderly Act: The Act on Older Persons B.E.2546 (2003A.D.) (Bangkok).

Sakunphanit, T.; Suwanrada, W. 2011. “The 500 Baht Universal Pension Scheme – Thailand”, in Sharing innovative experiences: Successful social protection floor experiences (New York, ILO and UNDP), pp. 401-415.

Schmitt V.; Sakunphanit T.; Prasitsiriphon O. 2013. Social protection assessment based national dialogue: Towards a nationally defined social protection floor in Thailand (Bangkok, ILO).

Social Security Office (SSO). 2016. Social Security Fund: Number of Insured Persons (Article 40): 2007-2016 (Bangkok).

Suwanrada, W.; Dharmapriya, W. 2012. “Development of the old-age allowance system in Thailand: Challenges and policy implications”, in S.W. Handayani and B. Babajanian (eds): Social protection for older persons: Social pension in Asia. (Manila, Asian Development Bank), pp. 153-167.

125 age pension for public servants, was created as a temporary programme, Timor-Leste while a contributory social security Universal old-age and scheme, which covers both the public and private sectors, is expected to start disability pensions operating in 2017. Health and education are free for all Timorese citizens since the independence in 2002. Despite the progresses since 1. What does the system look independence, poverty is widespread, like? and older individuals experience reduced labour productivity and Timor-Leste is a young country, where capacity as the years pass. In a country a large share of the population lives where around 70% of the population in poverty and most are vulnerable. lives in rural areas and many depend In the aftermath of the 2006 East on their own food production, older Timorese crisis,1 the Timorese persons, representing around 6% government put in place a set of of the population, and people with cash transfer schemes, aiming to disabilities, were chosen as priority avoid future tensions and attend to groups given their vulnerability status. the needs of the most vulnerable. Before the establishment of SAII, older The first of these programmes was persons and people with disabilities the Pension for Older Persons and had to continue working or depend People with Disabilities (Portuguese: on their families for subsistence, subsídio de apoio a idosos e inválidos as no programme was in place to – SAII), a universal pension for the provide support for this group after persons with disabilities and for those the independence.2 The first payment above the age of 60. of SAII was made in August 2008, and In a short period, other programmes it achieved a substantial coverage were created, including benefits for among the elderly in its first year. the veterans of the independence struggle and Bolsa da Mãe, a cash Coverage transfer designed for poor female- headed households with children. In Being a universal programme, all 2012, the Transitory Social Security Timorese above the age of 60, or Scheme, a non-contributory old- individuals above 18 who have a disability, are eligible for SAII. It ¹ The 2006 East Timorese crisis was marked by riots and violence across the country as citizens took to the streets in their frustration with the apparent failure of ² Before independence, they were part of the Indo- nesian system. After independence, contributions the government to deliver the advances promised at the time of the independence in 2002. made to the previous system were lost.

126 Timor-Leste: Universal old-age and disability pensions currently delivers benefits to 94,287 Benefits individuals, being 86,974 older persons, which corresponds to 103% The benefit amount is the same for all of this group,3 and 7,313 people beneficiaries. Its value is defined by with disabilities, which corresponds official decree, and it is limited to one to 18.2% of target population. third of the minimum wage of civil Individuals living abroad are not servants. When launched in 2008, the eligible, and must be living in the SAII benefit was US$ 20 per month, country for at least one year to be and it was increased in 2010 to US$ able to receive the benefits. Figure 30 per month, its current value. The 1 shows the evolution of coverage benefit is above the national poverty of SAII throughout the years. Public line but below the international servants do not receive the SAII but are poverty line. It stands at 7.9 per cent covered by a higher benefit provided of the average household income in by the Transitory Social Security the country (see Figure 2). Scheme, which pays old age pensions calculated based on the average Figure 2. SAII Benefits (US$ 360 per year) as 4 lifelong income of the beneficiary. Share of Different Income Indicators Currently, this programme covers 688 former government employees.

Figure 1. Number of beneficiaries of the universal old-age and disability pension

Source: HIES 2011; World Bank Database; Ministry of Social Solidarity; and Author’s Calculations

Source: Ministry of Social Solidarity ⁴ Average Household income = $ 4,532.76 (2011); Average Rural Household income = $ 2,624.52 (2011) Average Urban Household income = $ 6,379.20 (2011); Average Household income of the ³ The coverage exceeds 100% due to some inclusion 20% poorer = $ 1,080 (2011); GDP per capita - Non- errors, or due to underestimation of the number of Oil (2014) = $ 1,169; National Poverty Line = $0.88 people above age of 60 by the projections based on per capita per day; International Poverty Line = the 2010 Census. $1.25 per capita per day.

127 Timor-Leste: Universal old-age and disability pensions

By law, the benefits should be paid by Legal aspects bank transfer monthly, or in cases that payment should be done directly, every Social protection is a right in Article three months. In practice, the lack of 56th of the Constitution of Timor-Leste, financial infrastructure, the difficult according to which, “every citizen is access to isolated communities and entitled to social assistance and security in limited resources for payment operations accordance with the law”. Furthermore, results in payments being made twice Articles 20th and 21th reinforce the right per year. of protection of the older persons and Individuals receiving Veteran benefits, people with disabilities. or benefits from the Transitory Social The programme was enacted in June Security Scheme for public workers 2008 by the Law Decree Nº 19/2008, created in 2012, are entitled to the which described, regulated and higher of the provisions. Additionally, effectively created it. In August 2010, individuals in prison, or inmates of a the “Diploma Ministerial Conjunto/MSS/ social institution of the government, lose MF/2010” increased the value of the temporarily the benefits, as long as these benefit. conditions remain. Institutional Arrangements Financing The Ministry of Social Solidarity (MSS) In the same way as all current social is responsible for the SAII programme, protection programmes of Timor-Leste, through the National Directorate SAII is financed by the General National of Non-Contributory Social Security Budget. Currently, its budget of US$ (DNSSNC, the acronym in Portuguese). 30.6 million plus US$ 1.3 million of Registration to the programme is done the Transitory Social Security Scheme, in partnership with the District and represents about 2.2% of GDP (non- Sub-District Administration (under the Oil) invested in income security of the Ministry of State Administration), and older persons, slightly above the Asia payments are done together with the and the Pacific regional average of 2.0%, Ministry of Finance and the National but still below global average of 3.3% Bank. Local leaders (Suco chiefs) play a of global GDP. While the global and significant part in the identification of regional figures include contributory the beneficiaries, and are responsible for and non-contributory schemes, the confirming that the older person in fact current Timorese old-age pensions are lives at the location. exclusively tax-funded. Looking only to When the creation of the Contributory tax funded pensions, Timor-Leste will Social Security Scheme is approved likely be found in the high end of the by the Parliament, an independent global investment. institution will be constituted to

128 Timor-Leste: Universal old-age and disability pensions manage and operate the new system. five topics: transitional shelter and Once this occurs, it is planned that the housing, social protection, security responsibility of administration of the and stability, local socio-economic Transitory Social Security Scheme and development and confidence- of SAII will be transferred to the newly building/reconciliation activities. As created National Institute of Social a consequence, the mentioned set Security. of social provisions was created to lower tensions and to promote social 2. How was this achieved? peace. The social protection package launched in 2008 included SAII, the As mentioned, SAII was developed Veteran benefits, and Bolsa da Mãe partly as a strategy to mitigate risks programmes, and the fast increase of unrest and instability due to the in beneficiaries and coverage led widespread poverty and vulnerabilities, to expressive increases in social and partly as means to alleviate expenditures, from US$109 million in poverty. However, the creation of 2008 to US$160 million in 2012. the universal pension scheme is solidly based on the Constitution Overcoming constraints of the nation that expresses the right to social assistance to all, and For a country with such limited recognizes the extra attention older infrastructure, the pension coverage persons and people with disabilities attained, especially considering the require. Additionally, already in the speed it occurred, is an impressive feat. first National Development Plan (NDP) Currently, SAII covers almost 87,000 from 2002, social assistance was seen older persons, number that corresponds as an important tool for social stability. to 103% of the population above the age Furthermore, the NDP also foresaw of 60 in Timor-Leste. However, coverage the provision of support for older of persons with disabilities remains a citizens and persons with disabilities, challenge. It is estimated that there are as it reinforced the situation of about 40,000 persons living with physical vulnerability faced by this group. or mental disabilities in the country, and In the first years of independence, SAII reaches only 7,313 of them – about the government chose not to rely on 18.2% of the target population. financial benefits for social assistance, As mentioned, the lack of financial but offered non-cash benefits to infrastructure in the districts and the households, often in ad hoc manner. difficult access to isolated communities After the conflicts of 2006-2007, result in payments being made only the approach to social protection twice per year. A solution for this is being changed, as the National Recovery developed in two manners; the first is to Strategy concentrated efforts on progressively require the use of a bank

129 Timor-Leste: Universal old-age and disability pensions account to receive the benefit – current and even from survey collectors. For limitations are due to the fragile banking coverage among this group to increase, infrastructure in the districts. And the people with disabilities need to be second, designed for the beneficiaries perceived as individuals with the same with mobility problems and who are rights and needs as anyone else. In this sick, is the use of mobile units for sense, the government is investing in payment. This system is still running on raising awareness and social inclusion of a pilot basis. persons with disabilities. Other issues arise from problems Additionally, despite the high coverage with documents and identification of of older people, the value of the benefit beneficiaries. Many citizens of Timor- paid has not being adjusted since 2010. Leste do not have an identification Inflation during this period, has reduced document, and the most common the purchasing power of the transfer, document among the Timorese is and most likely, the impact of the the electoral card. This creates three programme. Indexation mechanisms problems. First is to identify those who could be set to help guarantee that the do not have any documents – often pension remains at an adequate level to because they never had, or because support the older persons and people it was lost during displacement due with disabilities in their subsistence. to conflicts. The Suco5 chiefs often intervene in these situations to attest 3. What are the main results the applicant’s identity. The second in terms of impact on people’s issue is that the electoral card is easily lives? falsified, leading to fraud cases, which can partly explain the coverage of older Outcomes persons being above 100%. Lastly, the lack of documentation extends to death As mentioned, the old age pension certificates, which are not issued, and achieved universal coverage from its therefore beneficiaries that die are not early years, and has been keeping this reported and unjustified payments until today. There were few studies on could still be made to family members. the effective impact of the pension. Improving coverage among people However, a simulation calculating with disabilities goes beyond the consumption distributions with and improvement of identifying and without the transfers made in 2011, registering beneficiaries. Families are estimated that SAII reduced national often ashamed of having a member poverty6 from 54% to 49% and poverty with disability, and thus hide them from among older persons from 55.1% to outsiders – including social workers 37.6%. For persons with disabilities,

⁵ Sucos are the smaller administrative unit of the ⁶ At the international poverty line of USD 1.25 per state, comparable to a hamlet or small village capita per day.

130 Timor-Leste: Universal old-age and disability pensions

Figure 3. SAII Budget Evolution (in Million US$) and as Share of Non-Oil GDP invest a significant share of their resources into the improvement of the family earning capacity.

Sustainability of the system

The cost of SAII has varied from around 30 to 35 million dollars in the last few years, little above 2% of Non- Oil GDP. This will most likely change in the future, as life expectancy is increasing rapidly in Timor-Leste, rising from 60.2 years in 2001, to 68.2 in 2014. This will cause beneficiaries to receive the transfers for longer Source: Ministry of Social Solidarity, Directorate for Social Security; World Bank Database periods of time, as the number of beneficiaries also increases. However, reduction in poverty headcount was in the opposite direction, the creation 17.5 percentage points, from 63.3% to of a non-cumulative contributory old- 45.8%. age pension scheme, that will have broader coverage than the current Impact on people’s lives Transitory Social Security Pensions, will reduce the number people Although the older persons represent depending on SAII. Nonetheless, only about 6% of the population, dependency ratios of older persons almost 1 in 3 households have a will continue considerably low still person aged above 60 living in for many decades, as Timorese birth it. Information on the use of SAII rate remains one of the highest in the benefits show that recipients spend world. most of the transfer (88.4% of the benefit value) on food items, 4. What’s next? followed by frequent expenditure on education (by 28.1% of recipients) Plenty of challenges remain to – demonstrating a strong inter- improve the effectiveness and generational transfer. Other use of reach of SAII. In order to learn more the benefits is on health care (13.4%) about the programme’s impact, an and to purchase livestock or assets evaluation study is being developed. (6.4%). The uses of the benefit show This will bring light to what is the true that the older persons contribute to effect of SAII, and in which manners the overall household economy, and its operation and benefits can be

131 Timor-Leste: Universal old-age and disability pensions

improved. Parallel to this, efforts to Democratic Republic of Timor-Leste. (2002). improve registration and payment Constitution of the Democratic Republic of systems, as well as to raise awareness Timor-Leste. Dili, Timor-Leste. among the Timorese population to increase coverage of the disability Democratic Republic of Timor-Leste. (2002). pension are on the top of the agenda National Development Plan. Dili, Timor-Leste for the MSS. These improvements will, unques- Democratic Republic of Timor-Leste. (2008). tionably, help the programme to over- Decreto-Lei N.º 19/2008 de 19 de Junho - come some of its limitations; how- Subsidio de Apoio a idosos e Inválidos. Dili, ever it is important to highlight the Timor-Leste achievements the programme has had so far. The expressive coverage of Democratic Republic of Timor-Leste. (2010). older persons shows that even in plac- Diploma Ministerial Conjunto/MSS/MF/2010 es with little to no infrastructure, it is de 25 de agosto - Aumenta o montante do possible to reach most of the eligible Subsídio de Apoio a Idosos e Inválidos. Dili, population. Moreover, the Timorese Timor-Leste experience demonstrates that these types of programmes are affordable, Democratic Republic of Timor-Leste. (2011). and can have significant impacts on Timor-Leste Strategic Development Plan 2011- the lives of the beneficiaries and their 2030. Dili, Timor-Leste families. Democratic Republic of Timor-Leste. (2012). This Universal Social Protection brief 10 anos depois: O Contributo dos Programas was produced by André F. Bongestabs Sociais na Construção de um Estado Social em of the ILO. It was reviewed by Isabel Timor-Leste. Ortiz, Valérie Schmitt, Nuno S. M. Kent, L., & Wallis, J. (2014). Timor-Leste’s Cunha and Loveleen De of the ILO. Veterans’ Pension Scheme: Who are the Beneficiaries and Who is Missing Out?. http://ips.cap.anu.edu.au/sites/default/files/ SSGM%20IB%202014_13%20KentWallis%20 References Print%26Web.pdf

Dale, P., Lepuschuetz, L., & Umapathi, N. (2014). ILO. (2014). Pensions and other social Peace, Prosperity and Safety Nets in Timor‐ protection benefits for older persons: Leste: Competing Priorities or Complementary Insights from the ILO World Social Protection Investments?. Asia & the Pacific Policy Studies, Report 2014/15. Social Protection for All 1(2), 287-296. Policy Brief No. 3/2014. http://www.ilo.org/ gimi/gess/RessourcePDF.action?ressource. ressourceId=48037

132 Timor-Leste: Universal old-age and disability pensions

Umapathi, N., Dale, P., & Lepuschuetz, L. (2013). Timor-Leste-Social assistance public expenditure and program performance report (No. 73484). The World Bank.

World Bank. (2014). Creation of a reformed pension system for civil servants in Timor- Leste. Washington, DC: World Bank Group. http://documents.worldbank.org/curated/ en/2014/02/20425276/creation-reformed- pension-system-civil-servants-timor-leste

133 Main lessons learned Trinidad and At least in principle, the combination of the NIB pension and the SCP is Tobago considered to be universal. Anybody aged 65 and older is entitled to a Universal Pensions benefit. Even if someone does not contribute sufficiently to qualify under the contributory scheme, the Old-age protection in Trinidad individual can rely on a SCP from age and Tobago 65, provided compliance with some residency criteria. Trinidad and Tobago’s is ranked as a high human development category Old-age pensions follow the right- and positioned 64 according to the based approach and are include in Human Development Index. While national Acts. Universal free health the country has performed creditably access and a wide range of services areavailable to old-age persons. in the last decade, there was a Trinidad and Tobago is very well decline in 2015 and future economic aligned with the provision of the performance is being challenged. Social Protection Floor for old-age GDP growth and revenue mainly persons which requires: comes from the energy sector (oil and gas) and related companies and • access to a nationally defined set therefore the country is not immune of goods and services, including to the challenges posed to oil-based essential health care, and economies. The latest official poverty rate • basic income security, at least at a was 16.7 per cent (2005 Survey nationally defined minimum level, of Living Conditions), 1.2 per cent for older persons. of the population was extremely poor (indigent) and 9 per cent were group and the age group of 80 years vulnerable to poverty. While the and over was also growing. The data 2014 Survey of Living Conditions further revealed the feminisation of will disclose precise poverty figures ageing. preliminary findings have already In Trinidad and Tobago, the pointed to an increase in the poverty Government play a major role in the rate. There is no official poverty line social protection landscape. There in Trinidad and Tobago. The 2011 is a very comprehensive suite of Census indicated that the country had services for older persons aimed at an ageing population. 58 per cent of managing the various risk associated older persons fell within the 60-69 age with this cohort. Poor health, a major

134 Trinidad and Tobago: Universal Pensions risk associated with older persons, social assistance programmes. There is adequately addressed by the is also a wide range of services Ministry of Health (MoH). provided to old-age persons. Universal access to free health care Table 1. Population (in thousands) at health clinics and hospitals, as well as the provision of selected 2010 2015 2020 drugs at no cost are guaranteed TOTAL 1,328 1,360 1,378 under the Chronic Disease Assistance Programme (CDAP). The CDAP is 60-64 55 65 75 managed by the Ministry of Health 65-69 42 49 58 (MoH) and provides citizens with 70+ 68 79 94 free prescription drugs and other TOTAL 60+ 165 193 227 pharmaceutical items to combat 60+ / TOTAL 12.4% 14.2% 16.5% a number of diseases including: diabetes, cardiac diseases, arthritis, Source: United Nations, Department of Economic and glaucoma, mental depression, high Social Affairs, Population Division (2015). blood pressure, benign prostatic hyperplasia, hypercholesterolemia, 1. What does the system look Parkinson’s disease and thyroid like? diseases. Where prescriptive medication is not available at the The Social Protection System in public health dispensary, such a Trinidad and Tobago has undergone service is available under the Ministry significant modifications in the of Social Development and Family number and scope of services offered Services. Accessibility and coverage to older persons. Today, however, are not issues associated with the the system operates in very much health care system as the public the same, as it was in the earlier offerings are usually complemented years, consisting of contributory and by subsidized services from within non-contributory schemes, including the private sector when necessary. universal health access through public Loneliness, one of the major risks for health facilitates. The social insurance older persons, is managed through and social assistance programmes the Senior Centres Programme which continue to provide income security was designed to bring older persons for older persons in Trinidad and together so that they expand their Tobago. The National Insurance Board social capital. The programme, (NIB) administers the social insurance which targets older persons who and the Social Welfare Division (SWD) are in good health and physically of the Ministry of Social Development active, is designed to provide the and Family Services (MSDFS), the necessary physical, social, and

135 Trinidad and Tobago: Universal Pensions mental stimulation and support subsidized housing programmes are mechanisms to enable older persons also available to older persons. to optimize their later years. Centres The Geriatric Adolescent Partnership are administered by NGOs and/or Programme and the Retirees CBOs, with financial support from the Adolescent Partnership Programme Government. Elderly and Differently bridge the generation gap and Abled Mobile (ELDAMO) provides allow older persons to interact with free transportation to older persons younger persons and provide mutual to go about their daily routine. Free support to each other. Older persons transportation on the public service also benefit from a number of public transport system (bus rides; Ferry programmes and aids such as: free Trips to Tobago; and trips on Water transportation; caregiving services taxis during non-peak hours) is also (means-tested service provided available to all older persons in through the Geriatric Adolescent Trinidad and Tobago. Partnership Programme). Several Homelessness is another risk other means-tested programmes associated with growing old. The are available to older persons such Homes for Older Persons Act provide as subsidies on annual water and oversight of Residential Homes for electricity rates; public education; older persons as well as the regulation home improvement grant programme and monitoring of all facilities for (aid for needy citizens whose houses older persons in Trinidad and Tobago. were substandard, dilapidated, or in Housing opportunities are also need of repair), house rental grants, available under the State, such as household furniture and appliances, the Pensioners Quarters, as part of home care and assistive devices. the support for older persons. Other The OPIC was established by the

Table 2. Structure of the pension system

SOCIAL CONTRIBUTORY HEALTH PENSION PENSION COVERAGE

Min Finance MoH INSTITUTIONS MSDFS (supervision) CEDAP Old-age pension Old-age grant Health care BENEFITS SCP Social services Survivorship Drugs Invalidity Employed Aged 60or more persons BENEFICIARIES Universal Means tested Domestic workers

136 Trinidad and Tobago: Universal Pensions

Ministry of Social Development The NIB pension is calculated based on and Family Services to serve as a the categories in which contributions referral facility for information on have been paid. An average rate resources, services and products for of contribution is calculated by older persons. Social programmes considering all the contributions paid. for older persons that treat with poor The earnings class to which this average health, homelessness and loneliness rate corresponds is the class in which continue to have relevance in Trinidad the benefit will be paid. The minimum and Tobago. These are some of the monthly pension is TT$3000 (approx. social situations confronting older US$445), which represents 115 per persons which Government seeks to cent of the minimum wage established address through various initiatives. at TT$2,600 (approx. US$388) per month. Current pensioners receiving Benefit packages the minimum pension represent 97 per cent of the total beneficiaries. The NIB retirement pension ispaid The SWD administers the Senior at age 60 to anyone who has been Citizens’ Pension (SCP), (formerly insured with a minimum of 750 weeks Old Age Pension, in accordance with of contributions. A retirement grant the Senior Citizens’ Pension Act in the form of a one-time lump sum Chapter 32:02. The SCP is a monthly payment is paid to those insured grant paid to persons aged 65 or persons who have made less than more, based on their income and 750 weekly contributions. The overall residential status. SCP recipients must contribution rate is 13.2 per cent (4.4 be resident in Trinidad and Tobago per cent employees and 8.8 per cent for twenty (20) years preceding the employers) and the maximum insurable date of application. Any periods of earning are TT$13,600.00 per month. absence must not exceed five (5) Contributions are paid according to 16 years in the aggregate during the wage classes. The self-employed are twenty (20) years preceding the not covered under the NIB. application. Notwithstanding, SCP is paid to a person who is a resident and Table 3. NIB beneficiaries and expenditure has spent a period of fifty (50) BENEFICIARIES 2013 2014 2015 years in the aggregate in the country. LONG-TERM 132,253 137,481 144,804 SHORT-TERM 32,207 30,805 32,804 TOTAL 164,660 168,286 177,608 BENEFIT TT$3.56 TT$3.92 TT$4.22 EXPENDITURE Bn Bn Bn Source: National Insurance Board

137 Trinidad and Tobago: Universal Pensions

Table 4. Long term benefits (LTB), 2015

% of Total Expenditure % of Total Benef. LTB Mn. TT$ expenditure

RETIREMENT 96,395 66.57 3,362.09 86.10 PENSION GRANT 4,568 3.15 139.15 3.56 *SURVIVORS 39,644 27.38 329.01 8.43 BENEFIT INVALIDITY 4,197 2.90 74.62 1.91 PENSION TOTAL 144,804 100% 3,904.87 100

% OF TOTAL 81.53 BENEFICIARIES

* Survivor benefit and grant - Source: National Insurance Board As at September, 2016, 90,800 senior month. This has risen steadily over citizens were in receipt of the SCP. In the years with the maximum SCP 2015, 6,694 new beneficiaries were now being TT$3,500 per month with added to the system. Coverage has 74.21% of the recipients receiving expanded significantly over the years. this amount. The amount being paid In 2001 just over 61,000 persons were is greater that the established poverty receiving the Senior Citizens Pension. line and way above the indigence line. In 2000, the quantum of the grant The sum when calculated also exceeds stood at TT$620 and TT $720 per the established minimum wage for

Table 5. Senior Citizen’s Pension, 2016

SENIOR CITIZENS’ SENIOR INCOME PENSION BENEFICIARIES August 2016 TT$ US$ TT$ US$ 0-1,500.00 0 - 224 3,500 522 66,021 1,500.01 - 2000 225 –299 3,000 448 1,407 2,000.01 -2,500 300 –373 2,500 373 417 2500.01- 3,000 374 –448 2,000 299 19,342 3,000.01 - 3,500 449 –522 1,500 224 1339 3,500.01 - 4,000 523 –597 1,000 149 1129 4000.01 - 4,500 598 -672 500 75 303 Source: Social Welfare Division

138 Trinidad and Tobago: Universal Pensions the country. Where there are two Financing persons living in the same household (husband and wife) who qualify for SCP programme is national in nature and the SCP, they are guaranteed to have is financed directly from the National a minimum guaranteed household Budget. The many changes made to the income of $7,000 and if they have policy over the years, have resulted in other private income, they are likely a significant increase in the expenditure to have an income of TT$10,000. associated with the SCP. While in 2001 This steady increase in the amount of the expenditure was TT$548,368,305, persons receiving the pension is as a in 2015 the expenditure was result of successive administrations TT$2,647,056,180 (1.6% of GDP). For implementing responsive policy fiscal 2016/17 the sum allocated for changes for this target group. this programme is TT$3,319,554,016. Existing since 1939, Government has Already, it appears as though additional continuously enhanced the quantum funds will be required. The evolution Figure 1. Beneficiaries of the programme expenditure is described in Annex 2.

Legal aspects

NIB benefits are regulated by the National Insurance Act, updated to December 31st, 2014. The SCP Source: Department of Social Welfare is regulated by the Senior Citizens’ Pension Act, updated to December and other criteria associated with this 31st, 2014. grant so as to make it more responsive Two pieces of legislation continues to the needs of older persons. One guide the operations of the Social of the major changes responsible Welfare Division and the administration for the increase coverage is the of the grants.-The Public Assistance statutory income limit to qualify for Grant and the Senior Citizens’ Pension. a pension. Today, a person can have personal income of up to TT$4,500 a) The Public Assistance Act, Chapter and still qualify for a sum under the 32:03 provides for the establishment noncontributory SCP. Some of the of the Central and Local Public changes made over the years are Assistance Boards to administer the listed in Annex 1. Old Age Pension, Public Assistance, Disability Assistance and Urgent Temporary Assistance and for the maintenance of the various registers

139 Trinidad and Tobago: Universal Pensions

and accounting records in their the person’s personal bank accounts or districts. by cheques mailed directly to persons’ addresses. The Ministry launched a b) The Central Public Assistance biometric card system in 2015 and Board has responsibility for general this is expected to be the platform policy guidance and considers for the Central Beneficiary Registry. appeals made in connection with any This system allows for enhanced decisions made by the Local Public identity verification and identity fraud Assistance Board. The Local Boards reduction. Enrolment of persons enquire generally into the conditions commenced in July 2014. of the poor and consider applications for Senior Citizens’ Pension (Formerly 2. How was this major Old Age Pension), Public Assistance breakthrough achieved? and Disability Assistance Grants. The Central Board is comprised of The provision of welfare services eight members while the Local Public dates back to the colonial era and Assistance Boards have five members was largely an effort of civil society each. Members are appointed by organizations. The labour disturbances Cabinet following nominations made in the late 1930’s marked the first by the Minister in accordance with official form of social assistance Sections 4 and 8 of the Act. emanating from recommendations of the Moyne West India Commission. Institutional arrangements for The Commission drew attention to the delivery fact that it was essential to have a welldefined programme of social welfare To receive the SCP, an application and that the programme should be form must be submitted to the Local part of overall government policy. It Board Office of the respective district. was not until 1938 that the existing Applicants may be required to attend services were grouped together for an assessment meeting with the Local more effective impact and control and Public Assistance Board, which decides in July 1939 the Department of Social on all applications. Persons whose Welfare was inaugurated to administer applications have been rejected have Social Assistance and Old Age Pension. the right to appeal. There are 11 Local In Trinidad and Tobago a 1989 PAHO Public Assistance Boards covering the publication titled: “A profile of the country. As at September, 2016, 90,800 Elderly in Trinidad and Tobago” noted senior citizens were in receipt of the that the most important issues that SCP. Of this total, 9,058 were new confront older persons, 60 years and beneficiaries. over, in their daily lives pertained to The SCP is paid via direct deposit into economic and health matters. The

140 Trinidad and Tobago: Universal Pensions

PAHO study of 1989 also found that such the necessary support systems older persons that their basic needs are required so that older persons can were not being adequately met by cope with the many risks associated their financial situation. The 1999 with growing old. Another major survey by Dr. Acton Camejo also found risk associated with growing old that older persons had concerns about is retirement / unemployment/ their declining health and their ability employability. A welldefined and to go on performing activities related functioning system of pension is to daily living. The Report contends available to manage the effects of that poverty has a relevant age such a risk. The pension system in dimension, in that, both needs and Trinidad and Tobago is categorized in income potential change over the life three layers with the first layer being cycle. the non-contributory Senior Citizens Upon retirement, older persons are Pension for persons 65 years of age now required to live on fixed incomes or older and whose income is below a which constitute pensions and assets certain threshold.The second and third accumulated over their lifetimes. layers are risk mitigating strategies in In many instances, older persons the form government mandate for continue to function as the head of the social insurance and occupational household and their incomes present pension. Occupational pension plans the only steady flow of resources for are also offered by some employers the support of large and extended in the private sector, and public sector families. The fact that persons in pensions are provided to all monthly- the age group sixteen to forty-five paid employees. A wide range of years, representing the productive services provides support to old-age workforce, are being significantly persons. reduced suggests that older persons will be left to fend for themselves. In Impacts on people’s lives a survey carried out by Rawlins (2008) 33% of surveyed older persons felt Pensions in Trinidad and Tobago have lonely, despite only 16% are living extensive coverage. The World Bank alone. cited that Trinidad and Tobago has almost reached universal pension 3. What are the main results coverage. Their report cited that over in terms of impact on people’s 80% of persons 65 years and older are lives? receiving the non-contributory pension while in the social insurance scheme Many of the challenges faced by older administered by the National Insurance persons are related to their stage of Board there is a 73% coverage of development and are irreversible; as persons 60 years or older receiving long

141 Trinidad and Tobago: Universal Pensions term benefits. IT system. The objective of the system In terms of adequacy, the quantum is to facilitate the modernisation and of the various grants far exceeds the effective delivery of social services. The threshold that will be considered as system would automate an re-engineer poor. Additionally the system adopts the MSDFS’s core business processes, a concept similar to that of the Social operational activities, business Protection Floor, a guaranteed base and program performance thereby ($3,000 per month) complemented providing an integrated approach to case by benefits from other systems where management. It is expected that there older persons can invest and extend would be a seamless administration the scope, level and quality of benefits of social services together with data provided beyond this base. and information collaboration among Government ministries and agencies. 4. What’s next? Other developments propose by the MSDFS are: Trinidad and Tobago is under fiscal pressure because of the economic • Development of the National Plan slowdown generated by the adverse of Action on Ageing for Trinidad and international context and low oil and Tobago gas prices. Fiscal consolidation has started and public institutions are • Development of Residential Long- operating under reduced budgets Term Care Facilities in collaboration (i.e. 7 per cent in 2015). This is likely with Ministry of Health to continue in light of the expected reduction of GDP of 2 per cent for • Revamp the Senior Citizens Bureau 2016. Diversification of the economy (i.e., Skills Bank and Placement is high on the political agenda to Agency) ensure long term economic growth and sustainability. Despite this adverse • Develop Omnibus Legislation to context, the Government is expected allow for entry and investigations to increase budget allocations towards into the living conditions of the social infrastructure and programming elderly in their private domiciles by 1.2 per cent in 2016 vis-à-vis 2015. Other challenges are related to the • Review of the National Policy on efficiency and effectiveness of existing Ageing programmes as well as to the right incentives that social programmes • Assist in the formulation of the should provide. The MSDFS is fully National Policy on the Family to implementing the Biometric Card address the elderly within the System and establishing an integrated context of the family

142 Trinidad and Tobago: Universal Pensions

• Establish age-friendly healthcare This Universal Social Protection brief facilities was produced by Vijay Gangapersad, Ministry of Social Development and • Establish standards for universal Family Services of Trinidad and Tobago, accessibility to public buildings and Ariel Pino of the ILO Port of Spain. for the elderly and persons with It was reviewed by Isabel Ortiz of the disabilities ILO.

• Launch a Public Education Campaign on Ageing to include inter-generational initiatives References

• Conduct public awareness cam- Human Development Report 2015, Trinidad paigns to promote the CDAP, free and Tobago National Insurance Act, updated to bus, water taxi and ferry rides and December 31st 2014 free cataract surgery National Insurance Board, www.nibtt.net The linkages between contributory and noncontributory schemes in Senior Citizens’ Pension Act, updated to the areas of the benefits design, December 31st 2014 administration, financing, delivery of services and administrative tools Social Sector Investment Programme 2016. have to be reinforced. The NIB has The Government of the Republic of Trinidad to consider the implementation of and Tobago. social protection mechanisms for the self-employed and the unemployed. Social Welfare Division of the Ministry of Social Such protection schemes will have a Development and Family Services, www.mpsd. considerable effect in the long run in gov.tt terms of reducing the number of social assistance benefits that would have to United Nations, Department of Economic be paid in the future. and Social Affairs, Population Division (2015). The results of the 2014 Survey of Living World Population Prospects: The 2015 Conditions will provide invaluable Revision, custom data acquired via website. information about poverty levels in Trinidad and Tobago, particularly in comparison to poverty levels previously registered in 2005. It will also allow for further analyzing the adequacy and coverage of old-age benefits.

143 Trinidad and Tobago: Universal Pensions

Annex 1 Table 1. Evolution of the SCP in recent years

Previous Provision Changes Remarks Senior Citizens’ Pension(Legislation) Allowed pensioners psychological Senior Citizens’ Grant Senior Citizens’ Pension comfort and peace of mind Allowed greater purchasing TT$720-Maximum Payable $3,500-Maximum Payable power thereby improvement in (Yr-2000) the quality of life Interest from Savings account Interest from savings account is was used as income, thereby This new measure created an in- nolonger used in the denying persons who had centive for older persons to save calculation ofi ncome. savings

Income calculated on an annual basis. This measure resulted in persons being denied pension This measure allowed pension to Income calculated on a monthly where they received one-off be determined on real monthly basis payments that was in excess of a income. fixed amount even if they had no income.

Statutory limit from as low as Only real monthly income is used New statutory limit of $4,500.00 $5000 annually to $33,600.00 in the calculation of Senior Citizens per per annum. In the past assetwas Pension. More persons can now month. also used. qualify for the SCP. One-off/ lump sum payments In the calculation of Senior This measure allowed persons to used in the calculation of Citizens save rather than spend out their income. This prevented persons Pension lump sum payments money before they can qualify from qualifying for pension in shall not be taken into account. for SCP the year payment was received. Persons must have resided in Persons who reside an aggre- Trinidad and Tobago for 60 gate of 50 years in Trinidad and This change benefitted citizens years in the aggregate in order Tobago can who were born in this country. to qualify for Senior Citizens receive pension. Pension In the calculation of ordinary residence in Trinidad the following have been exempted: • Where the person was abroad Person who spent time abroad in for the purpose of employment the development of the country for a firm registered in Trinidad was penalized for being out of All periods spent out of the and Tobago or a company incor- the country. country used in the calculation porated in Trinidad and Tobago. This includes a number of of period abroad. • Where the person was abroad persons who had to serve at Mis- in the service of the Government sions or represent the country in of Trinidad and Tobago sport or otherwise. It is to be noted that this also applies to a dependent of such a person.

144 Trinidad and Tobago: Universal Pensions

Annex 2 Table 1. SCP programme expenditure TT$

Source: Social Welfare Department

Table 2. Expenditure in selected social assistance programmes (TT$ and % of GDP)

COMMUNITY-BASED ENVIRONMENT PROTECTION & ENHANCEMENT 606,200,000 PROGRAMME (CEPEP) 0.37% 379,506,550 DISABILITY ASSISTANCE GRANT(DAG) 0.23% 712,000,000 GOVERNMENT ASSISTANCE FOR TERTIARY EXPENSES (GATE) 0.43% 250,000,000 NATIONAL SCHOOLS DIETARY SERVICES LIMITED 0.15% 308,000,000 ON THE JOB TRAINING (OJT) PROGRAMME 0.19% 409,500,000 PUBLIC ASSISTANCE GRANT (PAG) 0.25% 2,861,470,500 SENIOR CITIZENS’ PENSION (SCP) 1.73% TARGET CONDITIONAL CASH TRANSFER PROGRAMME (FOOD SUPPORT 294,000,000 PROGRAMME) 0.18% 717,500,000 UNEMPLOYMENT RELIEF PROGRAMME (URP) 0.43% 6,538,177,050 TOTAL 3.96% Source: Social Sector Investment Programme 2016 – Central Bank

145 Main lessons learned

Ukraine • Although Ukraine demonstrate the quasi-universal coverage of Universal old-age, disability population based on its legal and survivors pensions framework, the replacement rate is relatively low and small benefits are distributed to large part of population covering for pensions The pension coverage in Ukraine is around 30 % of population. universal, based on a mandatory/ However, the effective coverage contributory system for employed and is lower due to the prevalence self-employed that includes old-age of the informal employment and pensions, disability pensions, survivor’s undeclared work. pensions, long service pensions and burial benefit. These social insurance • The discussion is ongoing aiming to mechanisms supplemented with transform universal or categorical social assistance are intended to cover social benefits to means-tested all Ukrainian citizens. benefits targeted to low-income families. However, more detailed analysis of the impact of these As many of the former republics, benefits on poverty reduction Ukraine inherited from the USSR is necessary. The positive a social security system and has outcomes of introduction of undergone enormous changes since targeted social assistance systems its independence. Consecutive waves could be counterbalanced by of reforms in 2003, 2010 and in 2014- negative features such as high 2015 brought significant changes to administrative costs which can the pension system, among which undermine the positive effect gradual increasing of retirement age, of more effective resources reduction of preferential pensions reallocation. for special groups, introduction, then revision, of single social contribution • The recent reforms in reduction of single social contribution and reduction of burden on was applied in order to reduce employees and employers. the informal employment Social security system, including and evasion of social security pension system is facing regular contributions. However the deficit. Undeclared and informal additional fiscal pressure on employment, wage arrears have the State budget to cover notably been a regular problems the widening financial deficit that resulted in a lack in social could lead to additional cuts in security contribution based on benefit entitlements.

146 Ukraine: Universal old-age, disability and survivors pensions

• Before considering the 1. What does the system look introduction of a mandatory like? funded pension tier, the Government and the social The reform of pension system is under partners should examine the way in Ukraine as part of its austerity experiences of failure of similar measures under the influence of reforms in countries in Central IMF. The main characteristics of this and Eastern Europe and in system, although rapidly changing Latin America. today, are as follow: The main risks covered by contributory • In 2015, the Ukrainian Government initiated the process for ratifying pension system include old-age, the ILO Social Security (Minimum disability, survivors. These risks Standards) Convention, 1952 (No. are supplemented by long service 102), which was concluded on 16 pensions and burial benefit. Social March 2016, and initiated the insurance mechanism is mandatory process for signing the European for all residents, and stateless persons Code of Social Security. employed under labour agreements or under civil law agreements, including those who work abroad wages. Since the independence and and self-employed persons. It covers especially during last three years, the labour pensions for those cleared poverty represents a crucial issue minimum qualifying period. Those specifically due to low income level of who are not qualified to receive population. The minimum wage and labour pension are receiving social the subsistence minimum as a key pension (social assistance). policy parameters linked to pension Some privilege-based pension level were frozen since 2014 thus schemes were widespread in Ukraine reducing the pensions in real terms for specific categories of employees in the period of high inflation and such as civil servants, legislators, economic downturn. judges, National Bank employees, Moreover Ukraine is facing a very diplomats, journalists, scientists, problematic pattern depopulation local governors, and victims of the due to decreasing birth rate when Chernobyl disaster. However, since 15.9% of the population is above the 2014 the reforms are under way age of 65, 21% above the age of 60. in order to reduce the favorable provisions for these special groups and render their pension benefits in line with regular workers. In addition, some other benefits can be taken into consideration such as the

147 Ukraine: Universal old-age, disability and survivors pensions

Table 1. Overview of key social, economic and demographic indicators

Region Europe & Central Asia Income level Lower middle income Population (2016) 42.59 million Annual population growth (2016) ↙ - 0.4% Population above 65 years old (2016) 15. 9 %

Life expectancy at birth for women/ men (2015) 76 / 66 years old

HDI (2014) 0.74 [81/188] Economically active population (2015) 18.1 million GDP (WB/WDI, 2014) 131.8 billion US$ GDP growth (2014) ↙- 6.8% Real GDP per employed person (in 1990 US$) 10,757.00 (2013) Average level of old age pensions in relation to GDP 21.5 % per capita (excl. mean-tested) (2007):

GGNI per capita, PPP: 8 560 current int $

Minimum wage / substance minimum per month: 1074 hryvnia (2016) Public social protection expenditure as a % of GDP: 24.6 (2013) Public social protection expenditure on old age, 16 (2013) disability and survivors as a % of GDP: Share of population above statutory pensionable 95% age receiving an old age pension: Share of economically active population 60.6 % contributing to a pension scheme: Share of unemployment population receiving 73.7% regular periodic unemployment benefits: Average monthly earnings of employees (2013) (local 3,265.00 currency) Employment-population ratio (%) - 2014 56.58

Urban population (WB/WDI, 2012): 69%

Sources: World Bank/ World Development Indicator (WB/WDI) United-Nations Development Programme/ Human Development Indicator (UNDP/HDI) State Statistics Service of Ukraine

148 Ukraine: Universal old-age, disability and survivors pensions caregiver’s allowance paid to an unpaid caregiver of a person older than age 80 in need of constant attendance; social services for lonely elderly persons etc. Furthermore, like all the citizens of Ukraine, the elderly can benefit from targeted mean-tested social assistance for low-income families. Furthermore, non-contributory social benefits, such as maternity benefit, child benefits to single mothers play a major role in It is possible to get a partial pension poverty reduction in Ukraine. for people who contributed during 15 to 34/29 years of coverage (for Coverage men/women).The pension is paid to unemployed older workers from ages The legal coverage of the Ukrainian 58/54 and 6 months to 60/55 and 6 social security system is almost months (men/women) (depending on universal (up to 95% of population the date of birth, gradually rising to above statutory pensionable age age 60 in 2021). The pension ceases if receiving an old age pension). the beneficiary is reemployed. However, the effective coverage All pensions are paid monthly through is lower due to the prevalence bank and post offices. The pensions of the informal employment and are payable abroad for six months undeclared work. in advance, beginning the month the pensioner leaves the country; Old-age pension covers: 60 years thereafter, only if there is a reciprocal old men with at least 35 years of agreement. contribution history and 55 and six Table 2 shows that between 2013 and months years old women (women, 2016 the number of beneficiaries of gradually rising to age 60 up to 2021) pension schemes is reducing, but with at least 30 years of contribution still remains around 29 % of overall history. The period of contribution population of the country. At the includes years spent in higher same time, the share of pensioners education, the armed services, receiving the benefit equal or below caring for persons with disabilities minimum pension is increasing from or children younger than age 3, or 2.4 % in 2013 up to 7.7% in 2016. This being unemployed and seeking a job, is worsened by the high inflation and if contributions are paid for these frozen indexation of pension benefits periods. since 2014.

149 Ukraine: Universal old-age, disability and survivors pensions

Table 2. Distribution of pensions, 2013-2016 (As of 1 January of each year) 2013 2014 2015 2016 Average Aver- pen- age Average Average Share sion Share pension Share pension Share pension (UAH) (UAH) (UAH) (UAH) Below the minimum 1.0% 583 0.9% 587 0.8% 582 5.3% 932 pension Equal to the minimum 1.4% 894 3.1% 949 4.6% 949 2.4% 1,074 pension Above the minimum 97.6% 1,488 96.0% 1,554 94.6% 1,621 92.3% 1,761 pension Minimum pension (UAH/ 894 949 949 1, 074 month) Total number of pensioners 13,639,739 13,533,308 12,147,189 12,312,459 (persons) Sources: ILO (2016)

Benefits during 2014, the average subsistence minimum has lost nearly 40 percent The labour pension in Ukraine is of its value in real terms up to 2016. calculated using following formula: Indexation of pensions was also frozen. The approved 2016 State budget takes Monthly Pension (in UAH) = AS x cW x cQ into account the planned increases in the subsistence minimum level for May AS - Average salary in the Ukrainian and December 2016. economy during three years before retirement These labour pensions covering old- cW – coefficient of wage of retiring age, disability and survivor social person compared to average salary in risks are subject to minimum and the Ukrainian economy maximum amounts. The Constitution cQ – coefficient of qualifying period of Ukraine (Article 46) and the (every working year can bring 1,35% of Law on State Social Standards and replacement income, with maximum Social Guarantees stipulate that the of 75 %) minimum wage and pensions and other social benefits must not be Due to the high inflation during lower than the subsistence minimum 2014 and 2015 and the freeze of established by law. Thus, minimum the subsistence minimum levels pension is related to minimum

150 Ukraine: Universal old-age, disability and survivors pensions subsistence level for the persons the required length of service), with who are incapable of work (elderly, 1 percent increase for each year of peoples with disabilities). This minimum additional work up to a maximum of 75 subsistence level (together with other percent of the average individual wage. minimum subsistence levels for children and able-bodied population) should Financing be reconsidered every year based on basket of selected commodities and According to ESSPROS methodolo- services. The maximum pension is 10 gy1, the total social security expendi- times the minimum pension. ture of Ukraine in 2013 was estimated Social pensions are paid to different at 24.6 % of GDP which is higher than vulnerable groups of population in any of the new EU countries neigh- aged 63/59 (men/women, gradually bouring Ukraine. However, this indi- rising to age 63 in 2021) who are not cator is close to the average in EU 28 working and ineligible for an old-age (28.6% of GDP). Expenditure on old- pension. The amount of these social age, disability and survivors’ benefits pensions is related to minimum dominate the Ukrainian social securi- subsistence level for the persons who ty expenditure with 16 % of GDP, or are incapable of work. Social pension nearly two-thirds of the total. This for old age varies from 30% to 100% Figure 1. Social security expenditure by of this minimum subsistence level. type, Ukraine and EU 28 (2013) If the social pension is less than the minimum subsistence level for the persons who are incapable of work (1074 UAH /month in the beginning of 2016), old people can get a social pension supplement to fill the gap. To encourage older workers to remain in the workforce, the old-age pension is increased for workers by 0.5% for every additional month of coverage if the pension is deferred up to 60 months after normal retirement age; 0.75% for every additional month of coverage for more than 60 months. According to current rules, the replacement rate is set at 45-50 % of the average individual wage for the best five or last two years for men and women (having accomplished ¹ European Integrated System of Social Protection Statistics developed by EUROSTAT and applied by the State Statistics Service of Ukraine

151 Ukraine: Universal old-age, disability and survivors pensions

rate is seriously higher than in EU 28. incentive of social security contribu- Drastic changes were introduced tion evasion, widen the tax base and in 2016 in social protection results in positive fiscal effects. -How financing mechanisms. Single social ever, preliminary observations show contribution which represents a that the total contribution revenue consolidated contribution rate will decrease, specifically affecting to finance all social insurance the pension system through the sig- schemes in Ukraine was significantly nificantly reduced allocation rate. reduced. After its introduction in Pensions and benefits were tax exempt 2011, employers’ contribution rate in Ukraine up to 2015. Since then, was between 36.76 % and 49.7 %, pensions above certain thresholds are depending on the assessed risk of taxed. Income from old-age pensions occupational accident and disease, between three and ten times the while employees’ contribution rate minimum wage is subject to a 15 was 3.6 %. In 2016, the single social percent personal income tax and a 1.5 contribution rate for employers was percent military duties tax. reduced to 22 %, and the contribution from workers was abolished (see Institutional arrangements Table 3). Ministry of Social Policy (http://www. Table 3. Changes in single social mlsp.gov.ua) is responsible for policy contribution rates in 2016 and provides general coordination. Categories 2011-2015 2016 Regional and loca-l social protection 36.76% to departments administer the program. Employers 49.7%, 22% Entrepreneurs The Pension Fund manages/admin- working on civil 34.7% 22% contracts and self- isters autonomously the pension employed persons scheme/pensions. (http://www.pfu.gov.ua/pfu/control/ Budgetary 36.3% 22% institutions uk/ index). Employees 3.6% 0% 2. How was this achieved? Physical persons working under civil 2.6% 0% contracts During the soviet era the full Civil servants 6.1% 0% employment and pay-as-you go system Sources: ILO (2016) guaranteed a quasi-full coverage of population for three main risks: old- This measure was introduced based age, disability and survivors. After on the hypothesis that the reduced the transition to market economy the contribution rate would reduce the important challenge was to integrate

152 Ukraine: Universal old-age, disability and survivors pensions the population of informal sector age for women from 55 to 60 years and self-employed persons as well as by 2021. This measure equalised combating informal employment. the retirement age for men and The Constitution of 1996 as well women. The reform also increased as specific laws on social security the contribution period required for benefits have established the right to the partial pension from 10 to 15 social security in Ukraine. Three major years for both sexes and increased waves of reforms were implemented the number of contribution years in 2003 (tentative for introduction of required to receive a full pension multi-pillar system), in 2011 (gradual (to 35 years for men and 30 years increasing of retirement age) and in for women). A maximum pension 2014-2015 (reduction of single social equaling ten times the minimum contribution rate and reduction of pension has been introduced for preferential pensions for special newly-granted pensions. Furthermore, groups). since 2011, single social contribution A reform conducted in 2003 with the (a consolidated contribution rate) has adoption of the Law of Ukraine “On been collected to finance all social mandatory State Pension Insurance” insurance benefits in Ukraine. was intended to rebuild the Ukrainian The reform measures implemented pension system. This law created in 2014 and 2015 were axed on the a legal framework for multi-pillar reduction of favourable provisions system, including: for special groups. Furthermore, the reduction of pension benefit was • a modified pay-as-you-go (PAYG) introduced for all the other groups program; of working pensioners who receive • a mandatory state pension insurance pensions higher than 150 percent of the (or mandatory individual accounts) = subsistence minimum for pensioners. second-pillar with a contribution of In 2016, the single social contribution employees; rate for employers was reduced to 22 • voluntary individual accounts = percent, and the contribution from third-pillar (‘Non-State Pension workers was abolished. Provision’) based on a tax relief (15 In 2015, the Ukrainian Government % of the gross yearly wage). initiated the process for ratifying the ILO Social Security (Minimum However, the real implementation of Standards) Convention, 1952 (No. that new system has been postponed 102), which was concluded on 16 indefinitely due to lake of support March 2016, and initiated the process from population and social partners. for signing the European Code of The second wave of reforms started Social Security. in 2011 by increase of the retirement

153 Ukraine: Universal old-age, disability and survivors pensions

3. What are the main results This Universal Social Protection brief in terms of impact on people’s was produced by Clara Leymonie and lives? Andrei Tretyak of Expertise France. It was reviewed by Isabel Ortiz, Kenichi Although the majority of population Hirose and Loveleen De of the ILO. is covered by the pension schemes, the level of replacement payment remains rather low. This low level of pensions can be explained by the References widespread declaration of workers on minimum wage in order to reduce the Baranova, N. & K. Hirose (2010), Assessment social protection contributions and of the social security system in Ukraine taxes. This situation is resulted in the 2008–09; Crisis response and future reforms replacement only for officially declared (Budapest, ILO). wage and the low level of pensions. The numerous pension reforms were ILO (2016), Social security system of Ukraine in unpopular because the Government 2014-15 and beyond: Towards effective social has failed to organize a genuine protection floors, (ILO DWT/CO-Budapest). dialogue with population involving social partners. However the level ILO Social protection Platform Website: http:// of deficit of the Pension Fund was www.social-protection.org important and the efforts for gaining an equilibrium were necessary. IMF (2016), Reducing social security Another problem represents the direct contributions and improving the corporate and energy subsidies. The households, small business tax system, IMF Country Report and especially those composed of No. 16/25 (Washington, D.C.). the elderly peoples were granted with subsidized prices for these OCDE (2009) https://www.oecd.org/countries/ commodities. The government has ukraine/45336467.pdf carried out the reform of energy subsidies under the pressure of La lettre de l’Observatoire des Retraites (2013), IMF because these subsidies have Les retraites dans le monde: Etat des lieux concerned not only vulnerable layers continent par continent, Mai 2013 - N°19 of population, but the industry as well. The reform of 2016 has unified State Statistics Service of Ukraine (2013- household and commercial natural gas 2014). National social protection accounts in tariffs. Although there is no evidence Ukraine (Kyiv). based research yet, the impact of this reform on the wealth of elderly population seems to be important.

154 Ukraine: Universal old-age, disability and survivors pensions

World Bank World Development Indicators: http://data.worldbank.org/data-catalog/ world-development-indicators

HelpAge International: http://www.pension- watch.net/country-fact-file/ukraine/

United States Social Security Agency: https://www.ssa.gov/policy/docs/progdesc/ ssptw/2014-2015/europe/ukraine.pdf

155 Zanzibar Main lessons learned • The scheme shows that universal The universal Pension social protection for older persons Scheme is feasible, and can be financed by governments of low and middle income countries.

Zanzibar Universal Pension • A combination of advocacy to Scheme (ZUPS) build the political will of the government as well as the Zanzibar made history in April 2016 provision of technical support in when it implemented the Zanzibar relation to programme design has Universal Pension Scheme (ZUPS). This been important to successfully is the first social pension scheme in implement the scheme. East Africa to be fully financed by the • The government is currently Government. working to address remaining In 2014, the Revolutionary Govern- challenges relating to payment, ment of Zanzibar approved a Social verification and information Protection Policy that recognizes the management system. need to establish a universal non-contributory pension to address poverty. This policy sits within Zanzibar’s Vi- sion 2020, which has the objective of Overview of the pension system eradicating absolute poverty in the society. In March 2015, the government Pre July 1998, former civilian employees announced it would introduce a uni- received a pension under the Pensions versal pension as part of the 2015/16 Act No.2 of 1990. Post 1998, former budget, and the first payment was employees of the public and private made in April 2016.1 All Zanzibar citi- sectors received a pension from the zens over the age of 70, or other resi- Zanzibar Social Security Fund (ZSSF) dents who pass the age and residency for service after July 1998. However, criteria receive a monthly non-contrib- the fact that the majority of older utory pension of Tsh 20,000 (US$9). people have never been in the formal The pension is pegged to the consumer labour market means that few receive a price index as of April 2016. pension from this fund.2

¹ Yussuf, I. (2015) Tanzania: Isles unveils 830 billion ² Economic and Social Research Foundation and donor-weaning budget. Available at: http://allafrica. HelpAge International (2016). Baseline Survey com/stories/201505140993.html Zanzibar Universal Social Protection For Older People (Forthcoming).

156 Zanzibar: The universal Pension Scheme

Eligibility Criteria • Husband or wife An older person can apply for the • Son or daughter universal pension when he/she is: • Grandson or granddaughter • Son or daughter in law • A person 70 years of age and • A close neighbour if a family above; and member is not available. • A Zanzibar resident; or • Has been a resident of Zanzibar 1. Why was the Pension for over 10 years continuously needed? after the age of 18. The low number of people eligible Documents required for for contributory pension, coupled registration with the high level of informality and poverty in Zanzibar, created the need • Completed application form for an alternative way to guarantee • A recent passport size photo of income security in old age. Close to a the applicant third of the population (30 per cent) • Birth certificates or Zanzibar ID live below the basic need poverty line, card/birth certificate a high proportion of older people do • Proof of period of residency (in not have the option to get out of hard the case of non-Zanzibari) and strenuous employment, and many • (For applicants that cannot of them have additional health and 3 present themselves for regis- mobility issues. Preliminary results tration) from a baseline survey conducted • Affidavit / A letter or representa- before the pension started found tive form signed by the applicant that 79 per cent of older people over stating that he or she agrees on 70 years considered their economic representation by the specified situation to be worse than average. person. The survey also found that 63 per cent were receiving income from family Applicant Representative members, suggesting the challenges of old age is putting pressure on wider If an applicant is unable to present families that are also struggling with 4 himself or herself in person, he or poverty and insecurity. she can appoint another person ³ Daniel, S. (2015) SOCIEUX in Action. Available at: to apply in his or her place. People https://ec.europa.eu/europeaid/sites/devco/files/ who are entitled to represent socieux-newsletter-issue3-july-2015_en.pdf ⁴ Economic and Social Research Foundation and Hel- an applicant being one of the pAge International (2016). Baseline Survey Zanzibar following people: Universal Social Protection For Older People (Forth- coming).

157 Zanzibar: The universal Pension Scheme

2. How was this achieved? performance in relation to poverty alleviation.9 The introduction of the pension was A detailed Implementation Plan possible due to a combination of as well as a Standard Operations advocacy to build the political will for Procedures Manual also helped to the scheme, and technical support to answer technical questions on the answer key questions relating to the design of the scheme.10 scheme’s design and implementation. A central component of the advocacy The move in Zanzibar has been linked was persistent activities led by older to a wider advocacy effort towards people in both Zanzibar and Tanzania a universal pension in Tanzania as a mainland. The advocacy aimed to whole. Important inspiration for this influence political will of key political has been the positive experience of a parties. This was done through pilot social pension in place since 2003 various means like identifying political implemented by the Kwa Wazee NGO in champions to raise issues when North West Tanzania. Two evaluations in parliament, as well as creating in 2008 and 2014 provided evidence awareness through the media and on the impact of pensions on older older people’s campaigns. Older people and their families.56 The scheme people were made aware of their also provided evidence to advocate for social security rights to enable them national ownership and scale up of the effectively demand for these rights. programme. This was complemented Older people’s champions were also by evidence generated by situational identified to advocate, and engage assessment7 of older people, a with the political process at local and feasibility study of a social pension8 national levels. on mainland Tanzania and a review of social protection expenditure and The Benefit: Key indicators

⁵ Hofmann, S. and Heslop, M. (2014) ‘Towards Adequacy universal pensions in Tanzania Evidence on opportunities and challenges from a remote area, Ngenge ward, Kagera’. Available at: http://www. The benefit level of Tsh 20,000 is pension-watch.net/knowledge-centre/?guid=530d- c17d73c9a&order=n admittedly modest, and on its own ⁶ Hofmann, S. et al(2008) ‘Salt, Soap and Shoes for cannot lift older people out of poverty. School: Evaluation Report’. Available at: http://www. pension-watch.net/knowledge-centre/?guid=4fb- ⁹ International Labour Organization (2010) Zanzi- 0d2ecb389a&order=n bar. Social protection expenditure and performance ⁷ Pearson, A. (2009) Social protection policy: - Re review and social budget. Available at: http:// sponses to older people’s needs in Zanzibar. Avail- www.ilo.org/secsoc/information-resources/publi- able at: http://www.pension-watch.net/knowl- cations-and-tools/social-protection-expenditure/ edge-centre/?guid=4cd9be19d5144&order=n WCMS_SECSOC_16253/lang--en/index.htm ⁸ Daniel, S., et al (2010) Achieving income security in ¹⁰ Technical support for this was provided by a part- old age for all Tanzanians. Available at: http://www. nership between SOCIEUX (the EU’s technical sup- pension-watch.net/knowledge-centre/?guid=4cd- port facility on social protection) and HelpAge. 9c14151bb5&order=n

158 Zanzibar: The universal Pension Scheme

The benefit is equal to about half the received the Universal Pension. This food poverty line (Tsh 38,070) and 37 suggests that approximately 86 per per cent of the basic needs poverty cent of the targeted population have line (Tsh 53,377) as defined by the been reached. One of the main reasons HBS in 2014/15.111 The scheme is also for the remaining coverage gap is lack equal to about 1 PPP$ (international of awareness of the scheme, and the dollars) per day, making it roughly baseline survey found that 25 per cent half of the new international poverty of older people 70 years and over were line set at PPP$ 1.90 per day.12 still unaware of the scheme.15 To tackle International comparison, never- this challenge, the Shehias, District theless, suggests the benefit level is Officers and the Department for Social reasonable for a low income country Welfare have continued sensitization taking first steps to expand a univer- campaigns to inform communities on sal pension. At 12 per cent of average the universal pension scheme benefits income (GDP per capita)13, the benefit which has led to an increase in the is higher than social pensions in coun- numbers of registrations. tries such as Botswana and Swaziland, Looking to the future, it is recognised and not far below the regional average that the age of eligibility of 70 years is (17 per cent). The benefit is therefore not optimal for a country with relatively likely to make a substantial difference low life expectancy. There is talk of to older people and their families, par- plans to reduce the eligibility age to ticularly those living below or close to the legal retirement age of 60, which the poverty line. will mean coverage for about 60,000 older men and women. However the Coverage strategy for this has not been officially confirmed. In 2012, the Population and Housing Census estimated the number of older Financing people aged 70+ in Zanzibar to be 25,161.14 In May 2016, 21,750 people The Zanzibar social pension is the first universal cash transfer in East Africa ¹¹ Household Budget Survey 2014/15 Income and fully funded by the government. Income Poverty Preliminary Results. Available at: owww.ocgs.go.tz The government has allocated 6.5 ¹² Authors’ calculations using PPP$ conversation billion Tanzanian Shillings for the rates for Tanzania using International Monetary implementation of the scheme, Fund, World Economic Outlook Database, April 2016. which is approximately 0.24 per cent ¹³ GDP per capita is for Tanzania. of the GDP of Zanzibar. This makes ¹⁴ 2012 Population and Housing Census (PHC) by Age and Sex (2013). Available at: countrystat. org/country/TZA/contents/docs/Population%20 ¹⁵ Economic and Social Research Foundation and Distribution%20by%20Age%20and%20Sex%20Re- HelpAge International (2016). Baseline Survey Zan- port-2012PHC.pdf zibar Universal Social Protection For Older People (Forthcoming).

159 Zanzibar: The universal Pension Scheme the scheme the cheapest universal Legal aspect pension in Africa, with a cost slightly below Swaziland and Botswana, and The Zanzibar social pension is not significantly below Namibia, Lesotho entrenched in any legal framework. and Mauritius which spend between However, a Law on Older Persons is 1.2 and 2.9 per cent of GDP. currently under discussion that will establish an Older Persons Council, and Figure 1. Cost of universal pensions in Africa recognize among other things, social pension as a right of older people. Embedding cash transfers in legal framework is beneficial as it provides a benchmark through which citizens can advocate for the fulfilment of the right to social security. There is also a reduced likelihood of political changes jeopardizing the continuity of social cash transfers when it is entrenched in clear and effective legal and The scheme is financed from the institutional frameworks. National Budget and directly disbursed through the Ministry responsible Institutional arrangements for the elderly. This ensures that the budget is only spent on the pension. The Ministry of Empowerment, Social In order to sustain the expenditure on Welfare, Youth, Women and Children the universal pension, the government is responsible for overseeing the overall of Zanzibar will need to factor the implementation of the pension scheme. scheme in its wider efforts to secure The implementation is operationalized sustainable revenue for the wider through local structures called the government budget. Nevertheless, Shehias. Citizens aged 70+ are eligible the modest expenditure should not to register with an identity document be difficult to accommodate, and or birth certificate that provides proof focus should rather be on gradually of age and residency. Older people increasing expenditure, in order to without a valid form of ID can request increase adequacy and coverage of for a letter of confirmation from the scheme. the district commissioner. Payment is currently only disbursed through direct cash payments from pay points, with plans to include mobile money and bank accounts in the future.

160 Zanzibar: The universal Pension Scheme

Challenges

The government is currently working to address remaining challenges relating to implementation. One of such challenges is the lack of a robust management information system and adequate verification mechanisms. This means there is a missed Ahmed Mohamed (C) opportunity to generate routine data that can be used tochallenges “Some passers-by throw relating to implementation. The some coins at me which I use to buy food decentralisation of functions and and drugs to treat my regular chest pains. reliance on direct cash payments Once in a while some of my neighbours also presents potential fiduciary bring me food, however, there are times risks. The ZUPS is currently disbursed when I live on an empty stomach for days”. “But now I am very happy that by civil servants from various the Government has decided to give us a government ministries, and although monthly pension of 20 thousand shillings the government insists that this is a ($9). This is enough money for my needs. cost saving mechanism, it could be I really thank the Government for this potentially time consuming. special consideration, as it is my only reliable source of income. I will surely live Impacts happier in the remaining days of my life”16

HelpAge is undertaking a baseline survey with the Economic and Social Next steps Research Foundation of Tanzania to provide a benchmark against The government is already in which impacts of the pension can be consultation with the largest mobile measured. provider in the country to facilitate Although it is too early to quantify the efforts to gradually phase out cash impacts of the universal pension, there payments and improve the delivery of has already been some feedback from the pension. The Government is also some of the recipients. in the process of piloting a monitoring An example is Ahmed Mohamed, a system based on a structure of Older widower aged 97. Old age and poor Person’s Associations and Older health has limited his ability to continue Person’s Monitoring Groups. subsistence farming to feed himself. In a recent interview, Ahmed discussed the ¹⁶ Interview conducted in April 2016 during initial benefit of the pension scheme. the official launch of the universal pension in Zanzibar.

161 Zanzibar: The universal Pension Scheme

There is already a ripple effect on Tanzania Human Development Report the main land with older people also 2014 Economic Transformation for Human advocating for a universal pension. Development. Available at : http://hdr.undp. The Tanzanian Ministry of Labour org/sites/default/files/thdr2014-main.pdf have recently shared a proposed scheme for universal pension which International Labour Organisation (2010). has been proposed to combine older Zanzibar Social Protection Expenditure and person’s pension with a disability Performance Review and Social Budget. allowance. Other key areas to look at Executive Summary International Labour are the approval and implementation Office, Social Security Department – Geneva. of the Law on Older Persons that will guarantee the rights of older people, Household Budget Survey 2014/15 Income and as well as the building of effective Income Poverty Preliminary Results. Available monitoring and evaluation system to at: www.ocgs.go.tz. assist in citizen monitoring. Ministry of Empowerment, Social Welfare, This Universal Social Protection brief Youth, Women and Children (2016). Zanzibar was produced by Aderonke Gbadamosi and Charles Knox-Vydmanov of HelpAge Universal Pension Scheme (ZUPS). The International, with contributions from Standard Operating Procedures Manual. Smart Daniel and Leonard Ndamgoba of HelpAge International Tanzania. It was Economic and Social Research Foundation and reviewed by Isabel Ortiz and Loveleen De HelpAge International (2016). Baseline Survey of the ILO, and Alexa Haden and Adélio Zanzibar Universal Social Protection for Older Fernandes Antunes of SOCIEUX. People (Forthcoming).

References

HelpAge International (2010). Achieving income security in old age for all Tanzanians. Available at: http://www.pension-watch.net/ knowledge-centre/?guid=4cd9c14151bb5&ord er=nHelpAge International (2009).

Social protection policy: responses to older people’s needs in Zanzibar. Available at: http:// www.helpage.org/silo/files/social-protection- policy-responses-to-older-peoples-needs-in- zanzibar.pdf

162 Social protection floors reduce Developmental poverty and inequalities impacts of Social protection reduces poverty expanding social and social exclusion protection Social protection is a crucial instrument in addressing all forms of poverty. Cash transfer schemes have Universal social protection successfully reduced poverty in Africa, key to achieve the Sustainable Asia, Central and Eastern Europe, and Development Goals Latin America, potentially delivering much faster results than those “Social protection systems and expected from the “trickle-down” measures for all” figure highly among effects of economic policies. Although the priorities set out by the international in practice benefits have tended to be community inside the Sustainable lower than needed, a cash transfer at Development Goals (SDGs). Ensuring an adequate level can bring people necessary investments in social out of poverty overnight. Equally protection expansion will help member importantly, cash transfers have states make good on this commitment, had even larger effects on reducing but also many others included in the the depth of poverty. For example, 2030 agenda. South Africa’s non-contributory Universal social protection is likely grants have reduced the poverty gap to advance progress on a host of by more than one-third (Woolard SDGs, including on reducing poverty et al., 2010), the Oportunidades and inequalities, the promotion programme in Mexico has reduced of decent work, inclusive growth, the numbers living in poverty by 10 and improvements to health and per cent and the poverty gap by 30 education outcomes. These cross- per cent (Skoufias and Parker, 2001), cutting developmental impacts are and Kyrgyzstan’s Social Protection illustrated in an expansive and growing Programme has reduced the numbers body of literature. Evidence from this in extreme poverty by 24 per cent and research is synthesized and presented the poverty gap among beneficiaries in this brief to show how investments by 42 per cent (World Bank, 2003). in social protection contribute to more The expansion of food assistance in productive, prosperous and equitable the United States is reported to have societies. reduced the number of households in extreme poverty by half (CBPP, 2014). Overall, social transfers and taxation

163 Developmental impacts of expanding social protection have reduced poverty by more Social protection is essential in than 50 per cent in most European addressing not only monetary poverty countries. but also social exclusion (Babajanian Social protection expenditure has and Hagen-Zanker, 2012). Indeed, a prominent role in reducing and social protection constitutes one of preventing poverty, containing the essential channels through which inequality and addressing social governments can distribute and exclusion. Particularly crucial is its redistribute income and resources, capacity to ensure that people can and share the benefits of growth, escape poverty for good: the risk of reinforcing the democratic mandates falling back into poverty is very high granted them on election to fulfil where effective social protection societal expectations. The key role of mechanisms do not exist (Chronic social protection in inclusive growth Poverty Advisory Network, 2014). is now widely recognized (e.g. OECD,

Figure 1. Social protection expenditure (percentage of GDP) and proportion of the population in poverty

Notes: R2 = 0.5326. Sources: Social protection expenditure: Based on data from IMF, OECD, Eurostat, ILO, CEPALSTAT, ADB and national sources. Poverty headcount: World Bank, World Development Indicators (accessed April 2013).

164 Developmental impacts of expanding social protection

Figure 2. Social protection expenditure (per cent of GDP) and income equality (Gini coefficient), latest year

Note: R2 = 0.3893. Source: Social protection expenditure: based on data from IMF, OECD, Eurostat, ILO, CEPALSTAT, ADB and national sources. Gini index: World Bank, World Development Indicators (accessed Jan. 2014); ADB, UN ECLAC; Solt, 2009; Solt, 2013).

2009). It is therefore not surprising Social protection reduces income that higher levels of social protection inequality expenditure are associated with lower levels of poverty (Figure 1).1 The role of social protection reaches far beyond a mere reduction of income poverty. While debate has for some time focused narrowly on poverty reduction and the efficiency ¹ The relationship between public social security of targeting, it is increasingly expenditures and poverty outcomes is complex, involving a variety of factors. It should be noted in acknowledged that the reduction of particular that US$2 PPP per day does not represent poverty is not sufficient to promote a meaningful absolute poverty line in high-income countries; this cut-off point was selected for the inclusive growth (UNDP, 2013; UN, purpose of the graph to ensure international 2013a; UN, 2013b). Broader social comparability.

165 Developmental impacts of expanding social protection protection policies encompassing households receiving a pension grow approaches such as extending on average five centimeters taller than social insurance are needed to help those in households without a pension prevent poverty and insecurity and (Case, 2001). to contain inequality (Figure 2).2 The correlation between public social Social protection supports positive protection expenditure and inequality education outcomes (as expressed by the Gini coefficient) is less strong than for poverty, but Social protection programmes, there is still a distinct relationship, including cash transfers, the supply suggesting that higher levels of social of free tuition and materials, and protection expenditure are associated school feeding programmes, have all with lower levels of inequality. been shown to lead to higher school enrolment rates, fewer school drop- Social protection contributes to hu- outs and less child labour by removing man capital development, reduces demand-side barriers to education, hunger and contributes to food se- including the need for poor families curity to rely on children for income-earning and care work. Transfer programmes There is strong evidence of the positive in Bangladesh, Brazil, Cambodia, impacts of social protection on hunger Ecuador, Ethiopia, Malawi, Mexico, and nutrition. In Africa, Asia and Latin Nicaragua, Pakistan, South Africa, America, cash transfers have been and Turkey have all demonstrated shown to improve both the quantity significant increases in children’s and the diversity of food consumption, school enrolment and/or attendance and to protect food consumption (Adato and Bassett, 2008). during shocks or lean periods. Better nutrition also contributes to better Social protection supports positive physical development: programmes health outcomes in Mexico, Malawi, and Colombia all demonstrate reductions in the Social protection can contribute to numbers of children with stunted better and more equal health outcomes growth (Yablonski and O’Donnell, in various ways. Investments in health 2009; Tirivayi, Knowles and Davis, infrastructure, staff and drugs are most 2013), while children in South African urgently needed where the burden of

² Again, the relationship between social protection illness is heaviest. Financial support policies (measured here by expenditure) and ine- is also needed to prevent families quality (here measured by Gini coefficient) is much falling into poverty because of heavy more complex than can be captured here. Well-designed social protection policies address not only in- out-of-pocket health expenditures. come inequality, but also various other dimensions A WHO cross-country study showed of inequality (see e.g. UNRISD, 2010; OECD, 2011; UNDP 2014).

166 Developmental impacts of expanding social protection this can be done by reducing the Social protection floors health system’s reliance on out-of- promote decent employment pocket payments and providing more and inclusive growth financial risk protection (Xu, Evans and Kawabata, 2003). Thailand’s Social protection promotes commitment to achieving universal employment access to health care led to significant improvements in health outcomes on Social protection plays a major role in a number of measures, including take- creating access to full and productive up of services and the rate of health- employment and decent work for all, related impoverishment (Evans et including women and young people, al., 2012; Tangcharoensathien et al., through cash transfers, active labour 2009). market measures, health insurance The Oportunidades programme in and family support policies. These Mexico combined cash transfers have been shown to encourage and free health services with labour market participation in improvements in the supply of health low- and middle-income countries services, leading to a 17 per cent by guaranteeing public work decline in rural infant mortality over a opportunities, covering the costs three-year period and an 11 per cent of jobseeking and supporting those reduction in maternal mortality rates with child-care responsibilities – (Barham, 2010; Adato and Bassett, with particularly strong effects for 2008). In Ghana, user fee exemptions women. In South Africa, labour for pregnant women led to a market participation among those significant reduction in the maternal receiving cash transfers was 13–17 mortality rate (Witter et al., 2007). per cent higher than in similar non- More recently, there is evidence recipient households, with the on the usefulness of broader social greatest difference among women protection interventions in HIV and (Economic Policy Research Institute, AIDS prevention, treatment, and care 2004). For young people who are and support (ILO, 2008; Temin, 2010). structurally unemployed or at high Cash transfers, for example, were social risk, the Joven programme in found effective in supporting families Chile combines work experience, to care for people living with HIV/AIDS training and apprenticeships, and this and in improving access to treatment model has been replicated in other and adherence. South American countries (World Bank, 2003). In other countries, such as India and Uganda, cash transfers have been used to provide employment for local youth

167 Developmental impacts of expanding social protection and poor people. Cash transfers can also their average number of hours of work provide critical resources for funding by 150 annually (CBPP, 2014). jobsearch, supporting quality training Many countries in Asia, Africa and and skills development, increasing Latin America have developed ways access to credit and bolstering the of coordinating social protection resilience of agricultural smallholders mechanisms with labour market in maintaining production. Public policies and services, thereby employment programmes can strengthening opportunities for the also be linked to green jobs and unemployed to return to the market. environmental improvements, as for One particularly interesting finding is example in Brazil and the Philippines. that adult participants in a number A recent study from the United States of the Latin American cash transfer indicates that giving food assistance to programmes mentioned above, as the children of poor families increases well as beneficiaries of similar schemes their average annual earnings in the in South Africa, could increase their long run by as much as US$3,000, and rate of economic activity, finding their

Figure 3. Positive impacts of the extension of social protection on inclusive growth

Source: Based on Behrendt, 2013; ILO, 2014

168 Developmental impacts of expanding social protection employability boosted through simple There are multiple channels through investments in and access to training which social protection systems can and employment services, and able support such investments in people to look for work more effectively with (see ILO, 2010; Social Protection Floor the costs of searching for jobs boosted Advisory Group, 2011; Behrendt, through the modest cash transfers 2013), with beneficial effects in both received by families. the short and the longer term. In the short term, social protection Social protection promotes can help to improve the health of economic growth the population, stabilize aggregate consumption, enable people to take Social protection schemes contribute more risky decisions and to engage in to sustainable economic growth more productive economic activities, by raising labour productivity and preserve and promote human capital empowering people to find decent and enhance the functioning of the jobs. Injecting money into rural labour market. It thereby contributes communities can have important to supporting structural changes in multiplier effects on the local the labour market and the economy, economy, stimulating trade in goods and also exercises its much-needed and services and encouraging more counter-cyclical function in economic dynamic local development based downturns, such as that caused by the on both agricultural and off-farm recent global crisis. activities (Tirivayi, Knowles and In the longer term, the effects Davis, 2013; Alderman and Yemtsov, of better access to food, better 2012). Social protection represents nutritional status and better an investment in a country’s “human health will contribute to the better infrastructure” no less important physical and mental development than investments in its physical of the population. The effects of infrastructure. Only a population that enhancing access to education and is healthy, well nourished and well improving educational performance educated can realize its potential for boost human development and productive employment. The positive also contribute to fostering a impacts of cash transfers on children’s more productive and more readily nutrition, and on access to health and employable workforce, which is one education, have been well recorded of the preconditions of sustained and around the world. Well-designed inclusive growth (Figure 3). social protection systems thus enable The crisis has triggered a shift in the a country to unlock its full productive way the international community potential and to promote inclusive sees the relationship between growth. growth, public intervention and

169 Developmental impacts of expanding social protection social protection. In Asia and the Pacific, for example, policy-makers References are increasingly moving away from export-led growth approaches alone Adato, M.; Bassett, L. 2008. “What is the towards more inclusive employment- potential of cash transfers to strengthen intensive recovery strategies which families affected by HIV and AIDS? A review emphasize the need to reduce high of the evidence on impacts and key policy domestic savings rates and improve debates”, Brief 10 in HIV, livelihoods, food the region’s underdeveloped social and nutrition security: Findings from renewal protection programmes (Ortiz et research (2007–2008) (Washington, DC, al, 2010; ILO, 2014). China is a good International Food Policy Research Institute). example, having massively expanded social protection schemes in recent ADB (Asian Development Bank): Social years to raise national living standards Protection Index database. and promote national demand. In Africa and elsewhere, the food Alderman, H.; Yemtsov, R. 2012. Productive price crisis highlighted the limitations role of safety nets, Social Protection Discussion of family- and community-based Paper 1203 (Washington, DC, World Bank). traditional support systems in responding to aggregate shocks and Babajanian, B.; Hagen-Zanker, J. 2012. Social spurred efforts to strengthen local protection and social exclusion: An analytical agriculture. At the global level, there framework to assess the links, Background is now an awareness of the need to Note (London, Overseas Development raise household incomes, expand Institute). internal markets and prepare better for future shocks by building up Barham, T. 2010. “A healthier start: The effect stronger systems during the current of conditional cash transfers on neo-natal and crisis recovery period. infant mortality”, in Journal of Development Universal social protection thus is key Economics, Vol. 94, No. 1, pp. 74–85. for socio-economic recovery, inclusive growth and human development, Behrendt, C. 2013. “Investing in people: an essential component of the 2030 Implementing the extension of social Development Agenda. security through national social protection floors”, in D. Kucera and I. Islam (eds): This Universal Social Protection brief was Beyond macroeconomic stability: Structural elaborated by the ILO. transformation and inclusive development (Basingstoke, Palgrave Macmillan), pp. 228–59.

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Case, A. 2001. Does money protect health ILO (International Labour Office). 2014 World status? Evidence from South African pensions, Social Protection Report 2014/15: Building NBER Working Paper No. 8495 (Cambridge, economic recovery, inclusive development and MA, National Bureau of Economic Research). social justice (Geneva).

CBPP (Center on Budget and Policy Priorities). OECD (Organisation for Economic Co-operation 2014. “Today’s safety net cuts poverty nearly in and Development). 2009. Promoting pro-poor half, provides health care to millions, and has growth: Social protection (Paris). long-term benefits for children”, in Chart book: The war on poverty at 50 (Washington, DC). OECD (Organisation for Economic Co-operation and Development). 2011. Divided we stand: Chronic Poverty Advisory Network. 2014. The Why inequality keeps rising (Paris). Chronic Poverty Report 2014–2015: The road to zero extreme poverty (London, Overseas Ortiz, I., Fajth, G, Yablonski, J. and Rabi.A. 2010. Development Institute). Social Protection: Accelerating the MDGs with Equity. (New York, UNICEF). Economic Policy Research Institute. 2004. The social and economic impact of South Africa’s Skoufias, E.; Parker, S. 2001. Conditional cash social security system (Cape Town, South Africa transfers and their impact on child work and Department of Social Development). schooling: Evidence from PROGRESA program in Mexico, FCND Discussion Paper No. 123 Evans, T.G.; Chowdhury, A.M.R.; Evans, D.B.; (Washington, DC, International Food Policy Fidler, A.; Lindelow, M.; Mills, A.; Scheil- Research Institute). Adlung, X. 2012. Thailand’s universal coverage scheme: Achievements and challenges – An Social Protection Floor Advisory Group. 2011. independent assessment of the first 10 years Social protection floor for a fair and inclusive (2001–2010), Synthesis report (Bangkok, globalization (Geneva, ILO). Health Systems Research Institute). Solt, F. 2009. “Standardizing the world income ILO (International Labour Office). 2008. Saving inequality database”, in Social Science Quarterly, lives, protecting jobs: International HIV/AIDS Vol. 90, no. 2, pp. 231–42. workplace education programme. SHARE: Strategic HIV/AIDS Responses in Enterprises: Solt, F. 2013. Standardized World Income Second report (Geneva). Inequality Database (SWIID), Version 4.0, Sep.

ILO (International Labour Office). 2010. Extending social security to all: A guide through challenges and options (Geneva).

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Tangcharoensathien, V.; Prakongsai, P.; UNRISD (United Nations Research Institute Limwattananon, S.; Patcharanarumol, W.; for Social Development). 2010. Combating Jongudomsuk, P. 2009. “From targeting to poverty and inequality: Structural change, universality: Lessons from the health system social policy and politics (Geneva). in Thailand”, in Peter Townsend, ed., Building decent societies: Rethinking the role of social UN ECLAC (United Nations Economic security in state building (London: Palgrave), pp. Commission for Latin America and the 310–22. Caribbean): Conditional Cash Transfer Programmes database: Non-contributory Temin, M. 2010. HIV-sensitive social protection: social protection programmes in Latin America What does the evidence say?, Paper prepared and the Caribbean database. for IDS, UNICEF and UNAIDS meeting on “The evidence for HIV-sensitive social protection”, Witter, S.; Arhinful, D.; Kusi, A.; Zakariah- Brighton, UK, 14–15 June 2010. Akoto, S. 2007. “The experience of Ghana in implementing a user fee exemption policy to Tirivayi, N.; Knowles, M.; Davis, B. 2013. The provide free delivery care”, in Reproductive interaction between social protection and Health Matters, Vol. 15, No. 30, pp. 61–71. agriculture: A review of evidence (Rome, Food and Agriculture Organization). Woolard, I.; Harttgen, K.; Klasen, S. 2010. The evolution and impact of social security in South UN (United Nations). 2013a. The report on the Africa, Background Paper to the European world social situation: Inequality matters (New Development Report 2010 (Florence, Robert York, UN Department of Economic and Social Schumann Centre for Advanced Studies). Affairs). World Bank. 2003. The contribution of social UN (United Nations). 2013b. Economic and protection to the Millennium Development social survey of Asia and the Pacific 2013: Goals (Washington, DC). Forward-looking macroeconomic policies for inclusive and sustainable development Xu, K.; Evans, D.; Kawabata, K. 2003. (Bangkok, UN Economic and Social Commission “Household catastrophic health expenditure: for Asia and the Pacific). A multi-country analysis”, in The Lancet, Vol. 362, No. 9378, pp. 111–17. UNDP (United Nations Development Programme). 2013. Humanity divided: Yablonski, J.; O’Donnell, M. 2009. Lasting Confronting inequality in developing countries benefits: The role of cash transfers in tackling (New York). child mortality (London, Save the Children UK).

UNDP (United Nations Development Programme). 2014. Humanity divided: Confronting inequality in developing countries (New York).

172 Sub-Saharan Key messages Africa: Economic and • Cash transfer programmes gen- productive impacts of erate a broad range of social and national cash transfers economic impacts, including en- programmes hancing the economic and productive capacity of poor rural families.

Social protection is increasingly • Results from rigorous impact recognized as a critical strategy for evaluations in seven countries poverty reduction and inclusive in sub-Saharan Africa have growth. Both, the Agenda 2030, as influenced the design of national well as Agenda for Humanity, stress programmes, while contributing the critical role social protection can to strategic decisions to expand play in the fight against poverty and coverage of social protection and exclusion, but also as a component the progressive move from donor- of resilience building. However, funded pilots to domestically- more than 70% of the world funded national strategies. population, especially in rural areas, lack adequate coverage of social • Impact evaluations, embedded protection; and thus we are still far in national policy processes have for achieving universal coverage contributed to strengthen the case goals. (ILO, 2014) for scale-up: building the credibility However, progressively, global and of an emerging sector; addressing regional level commitments are public misconceptions linked with translating into actions at country cash transfers, while supporting level: governments are defining learning around programme national social protection policies design and implementation. and strategies, as well as allocating national budgets to the expansion • The economic case has focused and scale-up of social protection on highlighting the role of social programmes, such as cash transfers. protection not only as a social This is certainly the case for sub- policy tool, but also as a strategic Saharan Africa where only about investment to enhance the 20% of the poorest receive social economic and productive potential assistance. of the poor. This brief brings together the critical mass of evidence emerging from • The impact of social protection is recent rigorous impact evaluations highly dependent on its design of government-run cash transfer and effective implementation.

173 Sub-Saharan Africa: Economic and productive impacts of national cash transfers programmes programmes in seven countries in sub- contribute to enhancing the future Saharan Africa. These assessments productivity and employability of have been developed under the today’s children and adolescents, Transfer Project/ From Protection to once they reaching working age. Production (PtoP) initiative, led by the Food and Agriculture Organization - Economic potential of the poor: of the United Nations (FAO) and In addition to social impacts, the United Nations Children’s access to predictable and regular Fund (UNICEF) in partnership with transfers enhances the economic national governments and research and productive capacity of even the organizations. poorest and most vulnerable people, The evaluations used mixed supporting the ownership of assets, methods, combining qualitative investment in more productive research, econometric analysis of activities, improved risk management quantitative evaluation data and capacities and empowerment of general equilibrium modelling of communities. local economy impacts. A critical contribution of this joint - Stimulating local growth: Benefits effort is the focus on the economic expand beyond direct programme and productive outcomes of cash beneficiaries, reaching the wide transfers on beneficiary households, community and generatingmultiplier as well as on the broader communities impacts in the local economy. and economies in which they live. This evidence contributes to Overall, evidence on economic and strengthen the economic case for productive impacts contributes the expansion of social protection to demonstrating the positive programmes. economic impact of cash transfers The case is based on three core pillars, and addressing concerns regarding supported by evidence presented in dependency and labour disincentives this brief: and thus showing that social protection is an investment, and not - Human capital development: Cash a hand-out. transfers reduce the economic barriers to access education, nutrition Background and health services, contribute to food security and dietary diversity During the past ten years, a growing prevent child labour as well as address number of sub-Saharan Africa the economic and social drivers of governments have launched cash HIV risk among adolescents. In this transfer programmes as part of their sense, cash transfer programmes social protection strategies. Many

174 Sub-Saharan Africa: Economic and productive impacts of national cash transfers programmes of these programmes originated The evidence: enhancing the from a concern about vulnerable economic potential of poor rural populations, often in the context households of HIV/AIDS, and chronic food insecurity. This influenced the setting Agricultural activities of objectives and targeting with an emphasis on the ultra-poor, labour- Cash transfers programmes had a constrained, and/or households variety of impacts on household caring for orphans and vulnerable livelihood strategies, especially children (OVC). The majority of these agricultural activities. In Zambia, the programmes are unconditional and Child Grant Programme (CGP) led to have been designed with strong a 36 percent increase in the area of participation of communities, with worked land as well as an increase an effort to improve food security, in the use of agricultural inputs, health, nutritional and educational including seeds, fertilizers and hired status, particularly of children. labour. The increase in input use Livelihoods of most beneficiaries are led to an approximately 36 percent predominantly based on subsistence increase in the value of overall agriculture and rural labour markets production, which was primarily sold and most live in places where markets, in markets rather than consumed on including of financial services (such farm. Moreover, the cash transfer as credit and insurance), are limited produced an income multiplier at the or do not function well. For this household level—the increase in per reason, access to predictable and capita consumption induced by the regular transfers can help beneficiary programme was 25 percent greater households manage risks from than the transfer itself. Overall the shocks and stresses, as well as relax grants led to a stronger engagement liquidity and credit constraints and of beneficiary households in address other market failures. This, capital investments for agricultural in turn, can increase productive production and new economic spending and investment, improve activities. access to markets and stimulate local In Lesotho, the Child Grants economies. Programme also increased crop input use and expenditures, including an eight percentage point boost in the share of households using pesticides (from a base of 12 percent). As in Zambia, the increase in input use led to an increase in maize production and, for labour constrained

175 Sub-Saharan Africa: Economic and productive impacts of national cash transfers programmes households, in sorghum production, increase in on-farm labour, as well as as well as in the frequency of by increases in non-farm businesses. garden plot harvest. In Zimbabwe, Families in Malawi, Kenya and the Harmonized Social Cash Zimbabwe have also increased their Transfer (HSCT) led to an increase engagement in non-farm business as in expenditure on fertilizers and in a result of the transfers received. the share of households producing The evidence also shows that cash groundnuts, while in Malawi the transfers reduce child participation Social Cash Transfer Programme on family farms of beneficiary (SCTP) facilitated an increase in both households. Participation in family maize and groundnut output. In both farming decreased overall in Kenya Kenya and Malawi, the cash transfer and Lesotho, for younger children in increased family food consumption Ethiopia and for girls in Zimbabwe. obtained from home production. In almost all programmes, cash Gender and women transfers led to an increase in the economic empowerment ownership of livestock. This ranged from impacts on all types of animals, Cash transfers offer also a great large and small, in Zambia and Malawi, potential for the economic and social to small animals in Kenya, Lesotho empowerment of women. Access to and Zimbabwe. Similarly, Ethiopia, cash can enable women’s autonomy Malawi, Zambia and Zimbabwe in some economic decisions, have experienced an increase in the promote their social and financial purchase of agricultural tools. inclusion, increase their ability to start small businesses and improve Impacts on labour supply their labour status. Impact evaluations of cash transfers Along with the increase in agricultural indicate that these help promote activities, the programmes also women’s economic advancement in affected labour reallocation within agriculture. For instance, as a result and outside the household, without of the Child Grants Programme in reducing total labour supply. Lesotho, girls aged 13-17 are 24 Specifically, a reduction in casual percentage points more likely to be agricultural labour – activity of last enrolled in school and 32 percentage resort for many poor households- points less likely to miss classes. was common to most countries. The Moreover, in Kenya and Malawi, shifts from agricultural wage labour transfers are helping women acquire to on farm activities were consistently productive assets and small livestock. reported in all countries. In Zambia In Malawi cash transfers led to particularly, this was offset by an changes in female beneficiaries’

176 Sub-Saharan Africa: Economic and productive impacts of national cash transfers programmes sources of income, with less casual Generating multiplier impacts in the agricultural (ganyu) labour being local economy done and much more engagements in income generating activities, such The evidence generated across these as selling food and vegetables at seven case studies showed that in local markets and setting up small addition to generating economic and businesses. productive impacts for beneficiary households, the transfer also affected Impacts on risk-coping strategies production in non-beneficiary households through market spillovers. In Evidence is also showing that cash other words, when beneficiaries re- transfers have improved families’ ceive cash and spend it, the transfer’s capacities to better manage risk. impacts are then transmitted from Households diversified their income the beneficiary household – who de- generating activities by increasing their mand goods and services – to others engagement in non-farm businesses, inside and outside the local economy, in Zambia and Zimbabwe, or switching often to households not eligible for types of non-farm business, in Malawi. the cash transfer, who tend to own The programmes, in Malawi, Ethiopia most of the local businesses. and Lesotho, reduced the number of These income multipliers are measured families who opted for negative risk via an innovative village economy coping strategies such as distress sales model, called the LEWIE (Local of assets, begging or changing eating Economy-wide Impact Evaluation) habits. Fieldwork also found that in model. LEWIE models constructed for almost all countries, households were the cash transfer programmes in Kenya, less likely to take their children out of Lesotho, Ghana, Malawi, Zambia, school. Zimbabwe and Ethiopia generated Moreover, the cash transfer nominal income multipliers ranging programmes allowed households from 2.52 in Hintalo-Wajirat in Ethiopia to be seen as more financially to 1.34 in Nyanza, Kenya. That is, for trustworthy and especially in every Birr transferred by the programme Ghana and Malawi transfers led to in Hintalo-Wajirat, up to 2.52 Birr debt repayments and reduction in in income can be generated for the loans. In addition, cash transfers local economy. However, when credit, in general reinforced existing social capital and other market constraints networks and community engagement limit the local supply response, the increasing the participation of the increase in demand brought about by poorest households in these critical the cash transfer programme may lead community social networks. to increased prices, and consequently a lower income multiplier

177 Sub-Saharan Africa: Economic and productive impacts of national cash transfers programmes

The spillover impacts further beneficiary households ranged from 7 reinforces the case for social percent in Ghana to almost 30 percent protection expansion: social protection in Zambia, which directly affected the is not only allowing poor and programmes’ outcomes. In Zambia, vulnerable families to improve their the CGP achieved far greater results on wellbeing and livelihood development, productive activities than the LEAP in but more so, to contribute to stimulate Ghana especially because of the bigger and strengthen local economic growth size of the grants. via trade and productive linkages. - The demographic profile of beneficiary households – and Implementation matters particularly the availability of labour capacities – also matters. Most of the A key lesson learned across all seven cash transfer programmes included countries is that social and economic in this brief, by design, have a large impacts depend on effective design proportion of labour constrained and implementation. A number households, which affects the nature of factors help to explain the of economic activities a household differences in results across countries: can employ. The CGP in Zambia regularity, predictability, transfer size, was the exception, with a target demographic profile. population of young families, with available labour. Finally, differential - Regular and predictable transfers access to productive assets besides facilitate planning, consumption labour, the nature of local markets, smoothing and investment. House- the effectiveness of local committees holds that receive irregular and un- in implementing a given programme, predictable transfers, such as was the and the nature of messaging case in Ghana, are likely to spend the associated with the transfers, all play a money differently. As a result, families role in determining the impacts of the in Ghana were not able to plan their programme. Differences in the size of investment and this led to fewer im- the multiplier among countries, and pacts directly on productive activities among areas within countries, are and livestock ownership. driven by the openness and structure of the local economy, where money - The amount of the transfer matters. is spent in the local economy and Transfer values should be large enough the intensity of the supply of goods to make a difference to families’ produced within the local economy. incomes. The size of the transfer as a share of per capita consumption of

178 Sub-Saharan Africa: Economic and productive impacts of national cash transfers programmes

Lessons learned and policy of promoting farm and household- implications: Building the level production gains. economic case for the expansion Cash transfers and other social of social protection protection measures have proven successful in reducing hunger and Evidence coming from country-level poverty, in meeting basic consumption impact evaluations has contributed needs and in reducing some of the to increase the understanding among market failures faced by the small policy makers of social protection family farmers benefiting from the as an effective measure to combat programmes. But cash transfers alone hunger, reduce poverty and foster rural cannot address all of these constraints development. The evidence shows than and move sustainably people out cash transfer programmes can generate of poverty. For example, bringing a broad range of impacts, including on social protection and agricultural the productive and economic activities of interventions together can promote both beneficiary and non-beneficiary growth in smallholder productivity households in the communities where by addressing structural constraints they are implemented. This provides a that limit poor households’ access comprehensive perspective (social and to land and water resources, inputs, economic impacts) and enhances the financial services, advisory services case to scale-up these programmes and markets. Cash transfers can be as a strategy to contribute to poverty linked to livelihood interventions reduction, as well as inclusive growth. and thus potentially serve as an The evidence has also helped to important complement to a broader address some of the policy concerns rural development agenda, including and misconceptions regarding cash a pro-poor growth strategy focusing transfer and dependency. In other on agricultural transformation. words, results show that contrary to Building the economic case for social creating disincentives to labour or protection is a concrete contribution willingness to generate productive to country-level policy discussions and activities, regular transfers provided actions around expanding coverage poor households with the opportunity of social protection, developing social to enhance their livelihoods and protection systems (Sustainable enhance their ability to contribute to Development Goal Target 1.3), and their local development- investing in allocating domestic investment for productive activities and, re-entering expansion in countries. In countries social networks. Cash transfer were such as Ghana, Kenya, Lesotho not only able to protect families from and Zambia many factors provided falling deeper into poverty, acting a a strong case for national policy short-term safety net, but as a means makers to promote scale-up: the

179 Sub-Saharan Africa: Economic and productive impacts of national cash transfers programmes

combination of solid and rigorous Daidone, S., Davis, B., Handa, S. & Winters, evidence; broad range of social and P. 2016. The household and individual-level economic impacts; a methodology that economic impacts of cash transfer programmes prioritized generating evidence as part in Sub-Saharan Africa. Rome, Food and of national policy processes; political Agriculture Organization of the United Nations champions at country level; support (FAO). and coordination by development partners such as UNICEF and FAO; and FAO 2016. From Evidence to Action. The Story the development of a learning agenda of Cash Transfers and Impact Evaluation in with diverse products released at Sub-Saharan Africa. Edited by Davis, B., Handa, critical policy moments. S., Hypher, N., Winder Rossi, N., Winters, P. & Yablonski, J. New York, Oxford University Press.

FAO. 2015. The state of food and agriculture This Universal Social Protection brief was 2015. Social protection and agriculture: produced by Natalia Winder Rossi and breaking the cycle of rural poverty. Rome, FAO. Massimiliano Terzini of the Food and Agriculture Organization of the United FAO. 2016. Social protection in protracted Nations (FAO), in partnership with the crises, humanitarian and fragile contexts. United Nations Children’s Emergency Rome, FAO Fund (UNICEF). It was reviewed by Isabel Ortiz, Christina Behrendt and Loveleen De of the ILO.

References

All country reports and briefs focusing on the economic and productive impacts can be found on FAO’s From Protection to Production (PtoP) project website: http://www.fao.org/economic/ ptop/publications

UNICEF-ESARO/Transfer Project 2015. ‘Social Cash Transfer and Children’s Outcomes: A Review of Evidence from Africa’.

180 Sub-Saharan Africa: Economic and productive impacts of national cash transfers programmes

Annex: The Programmes

Number of Incidence Cash Transfer Follow- Country Baseline Households on poverty Programme up Coverage line

Tigray Minimum Ethiopia 3 700 house- Social Protection 2012 2014 n.a. holds Package¹

147 000 house- Livelihood holds (45 000 Empowerment Ghana 2010 2012 additional hhs 33% Against Poverty to be enrolled in (LEAP) Sept 2016) Cash Transfers for Orphans and 2009, 363 000 house- Kenya 2007 41% Vulnerable Chil- 2011 holds dren (CT-OVC)

Child Grants Pro- 30 000 house- Lesotho 2011 2013 32% gramme (CGP) holds

Social Cash 170 000 house- Malawi Transfer (SCT)— 2013 2014 7% holds Expansion

Social Cash 2012, 242 000 house- Zambia Transfer (SCT) 2010 2013, 23.2% holds programme 2014

Harmonized So- 2014, 55 509 house- Zimbabwe cial Cash Transfer 2013 17.5% 2015 holds (HSCT)

1 Specific pilot in Tigray region. The flagship social protection programme in Ethiopia, the Productive Safety Net Programme (PSNP) cover almost 8 million beneficiaries.

181 Key messages

Financing universal There is national capacity to fund social protection in virtually social protection all countries. There are many options, supported by UN and IFIs policy statements:

Fiscal space exists even in the 1. Re-allocating public expenditures poorest countries: This brief 2. Increasing tax revenues presents options to expand social 3. Expanding social security coverage protection and contributory revenues 4. Lobbying for aid and transfers It is often argued that social protec- 5. Eliminating illicit financial flows tion is not affordable or that govern- 6. Using fiscal and foreign exchange ment expenditure cuts are inevitable reserves during adjustment periods. But there 7. Borrowing or restructuring existing are alternatives, even in the poorest debt countries. In fact, there is a wide vari- 8. Adopting a more accommodative ety of options to expand fiscal space macroeconomic framework. and generate resources for universal social protection. The eight financing analyses, replacing high-cost, low- options described in this brief are impact investments with those with supported by policy statements of larger socio-economic impacts, the United Nations and international eliminating spending inefficiencies financial institutions. Many -govern and/or tackling corruption. For ments around the world have been example, Egypt created an Economic applying them for decades, showing Justice Unit in the Ministry of Finance a wide variety of revenue choices as to review expenditure priorities, well as creativity to address vital so- and Costa Rica and Thailand shifted cial investment gaps. military spending to finance universal health services. 1. Re-allocating public expenditures: 2. Increasing tax revenues:

This is the most orthodox approach, This is clearly the principal channel which includes assessing on-going for generating resources, which is budget allocations through Public achieved by altering different types Expenditure Reviews (PERs) and of tax rates—e.g. on consumption, other types of thematic budget corporate profits, financial activities,

182 Financing universal social protection property, imports/exports, natural 3. Expanding social security resources—or by strengthening the coverage and contributory efficiency of tax collection methods revenues: and overall compliance. Many countries are increasing taxes for social in- Increasing coverage and therefore vestments, not only on consumption, collection of contributions is a reliable which is generally regressive and way to finance social protection, freeing counter to social progress, but also fiscal space for other social expenditures; on other areas. For example, Bolivia, social protection benefits linked to Mongolia and Zambia are financing employment-based contributions universal pensions, child benefits also encourage formalization of the and other schemes from mining and informal economy, a remarkable gas taxes; Ghana, Liberia and the example can be found in Uruguay’s Maldives have introduced taxes on Monotax. Argentina, Brazil, Tunisia and tourism to support social programs; many others have demonstrated the and Brazil introduced a tax on finan- possibility of broadening both coverage cial transactions to expand social and contributions. protection coverage.

Table 1. Examples of fiscal space strategies in selected countries Brazil Bolivia Iceland Lesotho Namibia Thailand Botswana Costa Rica Costa South Africa

Re-allocating public expenditures X X X X X

Increasing tax revenues X X X X X X X Expanding social security X X X X X X contributions Reducing debt/debt service X X X X X X X X

Curtailing illicit financial flows X

Increasing aid X

Tapping into fiscal reserves X X X More accommodative macro X X X framework

183 Financing universal social protection

4. Lobbying for aid and transfers: tapping into fiscal reserves for social investments. This requires either engaging with different donor governments or 7. Borrowing or restructuring international organizations in order existing debt: to ramp up North-South or South- South transfers. Despite being much This involves active exploration of smaller than traditional volumes of domestic and foreign borrowing ODA, bilateral and regional South- options at low cost, including South transfers can also support concessional, following careful social investments and warrant assessment of debt sustainability. attention. For example, South Africa issued municipal bonds to finance basic 5. Eliminating illicit financial flows: services and urban infrastructure. For countries under high debt Estimated at more than ten times distress, restructuring existing debt the size of all ODA received, a titanic may be possible and justifiable if the amount of resources illegally escape legitimacy of the debt is questionable developing countries each year. and/or the opportunity cost in To date, little progress has been terms of worsening deprivations of achieved, but policymakers should vulnerable groups is high. In recent devote greater attention to cracking years, more than 60 countries have down on money laundering, bribery, successfully re-negotiated debts, tax evasion, trade mispricing and and more than 20 have defaulted/ other financial crimes that are both repudiated public debt, such as illegal and deprive governments Ecuador, Iceland and Iraq, directing of revenues needed for social and debt servicing savings to social economic development. programs.

6. Using fiscal and central bank 8. Adopting a more accommodat- foreign exchange reserves: ing macroeconomic framework:

This includes drawing down fiscal This entails allowing for higher budget savings and other state revenues deficit paths and/or higher levels stored in special funds, such as of inflation without jeopardizing sovereign wealth funds, and/or using macroeconomic stability. A significant excess foreign exchange reserves in number of developing countries the central bank for domestic and have used deficit spending and more regional development. Chile, Norway accommodative macroeconomic and Venezuela, among others, are frameworks during the global

184 Financing universal social protection recession to attend to pressing United Nations agencies and others, demands at a time of low growth and is fundamental to generate political to support socio-economic recovery. will to exploit all possible fiscal space Each country is unique, and all options in a country, and adopt the options should be carefully examined, optimal mix of public policies for including the potential risks and inclusive growth and social justice. trade-offs, and considered in national Questions to consider on fiscal space social dialogue. Given the importance options during national dialogue of public investments for human include: rights and inclusive development, it is i. Reprioritizing Public Spending: imperative that governments explore Can government expenditures all possible alternatives to expand be re-allocated to support social fiscal space to promote national socio- investments that empower vulnerable economic development with jobs and households? Are, for example, current social protection. military, infrastructure or commercial sector expenditures justified in light Social dialogue: Fundamental to of existing poverty rates? Has a recent generate political will to exploit all study been conducted to identify potential options measures to enhance the efficiency of current investments, including steps National social dialogue is best to tackle and prevent corruption and to articulate optimal solutions in the mismanagement of public funds? macroeconomic and fiscal policy, the need for job and income security ii. Increasing tax revenues: Have all and human rights. While in some tax codes and possible modifications countries, national development been considered and evaluated to strategies and their financing sources maximize public revenue without have been shaped though social jeopardizing private investment? Are dialogue, in many other countries personal income and corporate tax this has not been the case. Public rates designed to support equitable policy decisions have often been development outcomes? What taken behind closed doors, as specific collection methods could technocratic solutions with limited or be strengthened to improve overall no consultation, resulting in reduced revenue streams? Could minor tariff social investments, in lack of public adjustments increase the availability ownership, adverse socio-economic of resources for social investments? Is impacts and, frequently, civil unrest. natural resource extraction adequately National tripartite dialogue, with taxed? Can tax policies better respond government, employers and workers to “boom” and “bust” cycles? Have as well as civil society, academics, financial sector taxes been considered

185 Financing universal social protection to support productive and social social and economic development? sector investments? Has there been any attempt to earmark an existing vi. Using fiscal and foreign exchange tax or introduce a new one to finance reserves: Are there fiscal reserves, for specific social investments – taxes example, sitting in sovereign wealth on property, inheritances, tourism, funds that could be invested in poor tobacco, etc.? households today? Are excess foreign exchange reserves being maximized iii. Expanding social security coverage and used to foster local and regional and contributory revenues: What is the development? percentage of workers contributing to social security? Can contributions to vii. Borrowing or restructuring social security be extended to more debt: Have all debt options been workers? Are current contribution thoroughly examined to ramp up rates adequate? Is there scope social investments? What are the to introduce innovations (e.g. distributional impacts of financing like Monotax in Latin America) to government expenditures by encourage the formalization of additional borrowing? Have different workers in the informal sector? maturity and repayment terms been discussed with creditors? Has a public iv. Lobbying for increased aid and audit been carried out to examine the transfers: Has the government legitimacy of existing debts? delivered a convincing case to OECD countries for increased aid, including viii. Adopting a more accommodating budget support, to support the macroeconomic framework: Is the scaling up of social investments? Has macroeconomic framework too there been any formal or informal constrictive for national development? attempt to lobby neighboring or If so, at what cost to macroeconomic friendly governments for South- stability? Could increasing the fiscal South transfers? deficit by a percentage point or two create resources that could v. Eliminating illicit financial flows: support essential investments for Has a study been carried out or a the population? Are current inflation policy designed to capture and re- levels unduly restricting employment channel illicit financial flows for growth and socio-economic productive uses?What can be done to development? curb tax evasion, money laundering, bribery, trade mispricing and other Lastly, have all options been carefully financial crimes are illegal and deprive examined and discussed in an open governments of revenues needed for social dialogue? Have all possible

186 Financing universal social protection fiscal scenarios been fully explored? Is there any assessment missing from the national debate? Are all relevant stakeholders, government, employers, workers, civil society, academics, United Nations agencies and others, being heard and supportive of an agreement that articulates an optimal solution in macroeconomic and fiscal policy, the need for job and income security and human rights? A good starting point for country level analysis is a summary of the latest fiscal space indicators for 187 countries, available in Annex I of “Fiscal Space for Social Protection and the SDGs: Options to Expand Social Investments in 187 Countries”1.

This Universal Social Protection brief is based on the paper “Fiscal Space for Social Protection and the SDGs: Options to Expand Social Investments in 187 Countries ” by Isabel Ortiz, Matthew Cummins and Kalaivani Karunanethy, published by the ILO, UNICEF and UNWOMEN.

1 Available at: http://www.social-protection.org/ gimi/gess/RessourcePDF.action?ressource.res- sourceId=515377

187

A SHARED MISSION FOR UNIVERSAL SOCIAL PROTECTION

Concept Note

In the early 21st century, we are proud to endorse the consensus that has emerged – that social protection is a primary development priority. Well- designed and implemented social protection systems can powerfully shape countries, enhance human capital and productivity, eradicate poverty, reduce inequalities and contribute to building social peace. They are an essential part of National Development Strategies to achieve inclusive growth and sustainable development with equitable social outcomes.

Universal coverage and access to social protection are central to ending poverty and boosting shared prosperity, the World Bank’s twin goals by 2030. Universal social protection coverage is at the core of the ILO’s mandate, guided by ILO social security standards including the Social Protection Floors Recommendation, No. 202, adopted by 185 states in 2012. Many countries have embarked in expanding social protection coverage and are reporting significant progress.

Since the 2000s, universality has re-entered the development agenda. First it was education: universal primary education became a Millennium Development Goal in 2000. Then it was health: in December 2013, the World Bank and WHO committed to universal health coverage. Now it is time for universal social protection.

For the World Bank and the ILO, universal social protection refers to the integrated set of policies designed to ensure income security and support to all people across the life cycle – paying particular attention to the poor and the vulnerable. Anyone who needs social protection should be able to access it. Universal social protection includes adequate cash transfers for all who need it, especially: children; benefits/support for people of working age in case of maternity, disability, work injury or for those without jobs; and pensions for all older persons. This protection can be provided through social insurance, tax- funded social benefits, social assistance services, public works programs and other schemes guaranteeing basic income security.

189 Concept Note

Why support universal social protection?

There is considerable rigorous scientific evidence that well-designed and implemented social protection systems can be the foundation for sustained social and economic development –for individuals, communities, nations and societies. • It prevents and reduces poverty, promotes social inclusion and dignity of vulnerable populations; • It contributes to economic growth: raising incomes increases consumption, savings and , investment at the household level, and raises domestic demand at the macro level; • It promotes human development: cash transfers facilitate access to nutrition and education, thus resulting in better health outcomes, higher school enrolment rates, reduced school drop-out rates, and a decline in child labor; • It increases productivity and employability by enhancing human capital and productive assets; • It protects individuals and families against the losses due to shocks, whether they be pandemics, natural disasters, or economic downturns; • It builds political stability and social peace, reducing inequalities, social tensions and violent conflict; social protection ensure greater social cohesion and participation; • It is a human right that everyone, as a member of society, should enjoy, including children, mothers, persons with disabilities, workers, older persons, migrants, indigenous peoples and minorities.

Universal Social Protection Coverage Today

Today, more than 30 low and middle-income countries have universal or nearly universal social protection programs. Over 100 others are scaling-up social protection and fast-tracking expansion of benefits to new population groups. Universal social protection is most commonly achieved for old-age pensions. Universal social protection for children is also a reality in some countries. Further, universality of protection has been endorsed by international statements by the African Union, ASEAN, the European Commission, G20, OECD and the United Nations.

190 Concept Note

Paths to universal social protection

There are many paths towards universal social protection. Both the ILO and the World Bank fully recognize: • national ownership of development processes towards universalism; • the choice of countries to aim for gradual and progressive realization or immediate universal coverage; • the heterogeneity in the design and implementation of universal schemes.

Countries have a wide set of options to achieve universal social protection coverage. Generally, universality is achieved by combining contributory and non-contributory schemes. For instance, the People’s Republic of China has achieved nearly universal pensions by complementing social insurance with social pensions in rural areas. Other countries like Bolivia provide tax-financed universal benefits to all older persons. Some countries choose gradual and progressive realization and others opt for immediate universal coverage.

Financing social protection

Countries have used many options to finance universal social protection coverage, such as: • Re-allocating public expenditures; • Increasing tax revenues, including revenue generated from taxation of natural resources; • Using the reductions of debt or debt servicing; • Expanding social security coverage and contributory revenues.

The variety of universal social protection programs needs to be sustainable and equitable, taking into account the contributory capacity of different population groups. Better enforcement of tax and contribution obligations ensures a broader and sufficiently progressive revenue base can accelerate progress towards universal social protection coverage. Enforcement of social security revenue collection may result in higher tax collections, particularly in countries with young demographic pyramids. Higher tax revenues can in turn support the promotion of statutory programs. For those poor and unable to contribute, governments have to identify sustainable sources of fiscal revenue.

191 Concept Note

The Vision: Universal social protection to ensure that no one is left behind

The World Bank and the ILO share a vision of a world where anyone who needs social protection can access it at any time.

The vision states that both institutions recognize that universal social protection is a goal that we strive to help countries deliver. Achieving universality would facilitate the delivery of the World Bank’s corporate goals of reducing poverty and increasing shared prosperity and the ILO’s mandate of promoting decent work and social protection for all. This shared mission would drive the development agenda to ensure lasting peace, prosperity and progress.

The Objective: Increase the number of countries adopting Universal Social Protection

The ILO and the World Bank’s shared objective is: “To increase the number of countries that can provide universal social protection, supporting countries to design and implement universal and sustainable social protection systems.”

The objective recognizes the aspirational elements of the ILO and the World Bank’s shared vision, and that the means of achieving the vision is through either the progressive or immediate realization of social protection, as well as through ensuring that there is no retrogression on progress achieved.

The objective recognizes that if countries develop comprehensive systems providing universal protection across the life cycle, and there is sufficient evidence that social protection systems are affordable, efficient, effective and equitable, then more countries will adopt these systems as part of their national development strategies. It also recognizes that there are large synergies and advantages if the ILO and World Bank collectively support the development of universal social protection systems in countries, with a focus on sustainable domestic financing.

Universal Social Protection Coverage in the Post 2015 Development Agenda

In 2016, the United Nations began implementing an ambitious new development agenda: the Sustainable Development Goals (SDGs). Today, the world continues to face prevalent and persistent poverty in many places while global inequalities are on the rise. As Member States identify national

192 Concept Note priorities and ultimately adopt post-2015 plans, they set the course of international development efforts for the next fifteen years to come. It is, therefore, imperative to get it right. Social protection and, in particular, universal social protection figure prominently among the set of SDGs:

Goal 1.3 Implement nationally appropriate social protection systems and measure for all, including floors, and by 2030 achieve substantial coverage of the poor and vulnerable

Social protection policies feature in goals to achieve gender equality and to reduce income poverty and inequality both between and within countries. The vision shared by the ILO and the World Bank reinforces the agenda’s universal aspirations to be applicable to all countries regardless of income level.

Timebound Actions

The World Bank and the ILO declare that they will work together to achieve this shared vision until the Sustainable Development Goals are realized.

In the short term, the ILO and the World Bank will:

• Launch the initiative with a high-level statement calling the attention of world leaders to the importance of universal social protection policies, as well as financing mechanisms. This statement will also articulate the shared vision of the two organizations, and outline tangible activities to advance universal social protection both in the lead-up to and following adoption of the post-2015 development agenda.

• Call for partners to join the initiative: Governments, development agencies, and civil society organizations can join a Global Partnership for Universal Social Protection.

• Document country experiences on universal social protection coverage: Succinct case studies presenting how countries achieved universal social protection coverage, and extracting good practices relevant for other countries.

193 Concept Note

• Documenting the development case and financing of universal social protection: Analyze the financing implications of universal social protection together with the generation of evidence about ways this can be innovatively resourced and other topics important to generate political will such as the investment case and socio-economic benefits of providing universal social protection.

• Monitoring framework for universal social protection in the post-2015 agenda: as part of the ongoing collaboration on social protection statistics.

• Global conference on universal social protection for inclusive and sustainable growth: High-level public event, presenting the country case studies, and launching the New Global Partnership for Universal Social Protection to Achieve the Sustainable Development Goals.

In the medium term (1-15 years), the World Bank and the ILO, as well as interested partners, will use their individual and collective resources and influence to support countries in their move towards providing universal coverage. This will include joint support to countries in their efforts to harmonize social protection policies, programs and administration systems, expanding fiscal space for universal social protection, addressing bottlenecks and adequately integrating universal social protection into their national development strategies.

World Bank Group and International Labour Organization (ILO).

September 2016

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The Sustainable Development Goals commit countries to developed nationally appropriate social protection systems for all. This volume presents success stories of countries in Africa, Asia, Central Europe and Latin America who achieved universal social protection coverage in the areas of child, maternity, disability and old-age pension benefits. The country cases provide detailed information regarding how universal coverage was build up over time, how benefits were designed, their administrative set up, financing and legal considerations as well as the positive developmental impacts. The success stories presented in this volume were prepared for the launch of the Global Partnership for Universal Social Protection in September 2016 at the UN General Assembly, to provide evidence that universal social protection is feasible in developing countries.

It includes contributions from: